Google Inc. will provide full refunds - with a minimum payment to consumers of $19 million - to settle Federal Trade Commission charges that it unfairly billed people for unauthorized charges incurred by children using mobile apps downloaded from the Google Play app store for use on Android mobile devices.
The FTC's complaint alleges that since 2011, Google violated the FTC Acts prohibition on unfair commercial practices by billing consumers for charges by children made within kids' apps downloaded from the Google Play store. Many consumers reported hundreds of dollars of such unauthorized charges, according to the complaint.
"For millions of American families, smart phones and tablets have become a part of their daily lives," said FTC Chairwoman Edith Ramirez. "As more Americans embrace mobile technology, it's vital to remind companies that time-tested consumer protections still apply, including that consumers should not be charged for purchases they did not authorize."
Google also agreed to change its billing practices to make sure that it obtains express, informed consent from consumers before charging them for items sold in mobile apps.
In-app charges are a part of many apps available from Google Play and can range from 99 cents to $200. In many apps used by children, users are invited to accumulate virtual items that help them advance in the game, but the FTC's complaint notes that what separates virtual money and real money purchases can be confusing.
When Google first introduced in-app charges to the Google Play store in 2011, the complaint alleges that Google billed for such charges without any password requirement or other method to obtain account holder authorization. Children could incur in-app charges simply by clicking on pop-up boxes within the app while using it.
In 2012, Google began presenting a pop-up box that asked for the account holder's password before billing in-app charges. But the new pop-up did not contain any information about the charge. Google also did not inform consumers that entering the password opened up a 30-minute window in which a password was no longer required, allowing children to rack up unlimited charges during that time.
During this time, some parents noted that their children had spent hundreds of dollars in in-app charges without the parents' approval. Others noted that children buying virtual in-game items with real money were unaware they were causing their parents to be billed.
According to the FTC's complaint, Google employees referred to the issue as "friendly fraud" and "family fraud" in describing kids' unauthorized in-app charges as a leading source of refund requests. The complaint further alleges that Googles practice has been to refer consumers seeking refunds first to the app developer.
The settlement requires Google to contact all consumers who placed an in-app charge to inform them of the refund process for unauthorized in-app charges by children within 15 days of the order being finalized. Google must make these refunds promptly, upon request from an account holder. Should Google issue less than $19 million in refunds to consumers within the 12 months after the settlement becomes final, the company must remit the balance to the FTC for use in providing additional remedies to consumers or for return to the U.S. Treasury.
The case is the FTC's third concerning unauthorized in-app charges by children. In January, the FTC announced a settlement with Apple Inc., requiring Apple to provide full refunds to consumers who were billed for unauthorized charges by children paying a minimum amount of $32.5 million. In July, the FTC filed a complaint in federal court against Amazon.com Inc., seeking full refunds for consumers and an order requiring informed consent for in-app charges.