The Week's Big Business Stories

Watchdog's Warning Over In-App Purchases

Updated: 2:24pm UK, Friday 11 July 2014

A consumer watchdog has warned parents to check settings on their mobile devices, after Amazon was sued over children making unauthorised in-app purchases.

Britain's Competition and Markets Authority (CMA) told Sky News: "Our advice to parents is to check their device settings, play their child's games themselves and read the game's description online.

"The CMA (and its predecessor the Office of Fair Trading) has been working closely with the online and apps based games industry, both in the UK and Europe, to put safeguards in place to ensure children are protected from making unauthorised payments and that customers are always treated fairly.

"If they have any concerns at all, they should contact Citizens Advice."

The warning comes after the US Federal Trade Commission (FTC) launched legal action over claims the online retail giant has not done enough to stop children spending money without parental consent.

The company said it would not agree to an out-of-court settlement with the FTC.

Amazon previously said that it was prepared for a court battle and that it had refunded parents who complained after being billed for the apps.

The dispute centres on children's games downloaded via Kindle tablets, and the difficulty differentiating virtual and real currency for purchase of virtual items.

In-app charges were introduced in 2011 and no password was required for purchases between $0.99 and $99 (£57).

The following year passwords were introduced for purchases over $20 (£11.60).

But the FTC said that although it updated password procedures last year, there was a period where children could still buy apps.

One customer complained that her daughter had incurred charges of more than $350 (£200) while playing a game.

The FTC said thousands of consumers had been affected and unauthorised charges ran into the millions.

FTC consumer protection director Jessica Rich said: "A central tenant in consumer protection is that you need to obtain consumer consent before placing charges on their bills.

"That applies all places, from brick-and-mortar stores to app stores."

The legal action seeks both refunds for consumers and a ban on billing account holders for in-app charges made without their consent.

Last week the FTC launched a similar lawsuit against T-Mobile, and in January it reached a $32.5m (£19m) settlement with Apple over in-app charges.

Charges racked up by children without parental consent has also caused concern for PayPal, which is owned by eBay.

In April, Sky News revealed PayPal was changing its terms and conditions for account users.

A new clause, activated last month, said users must agree to "take all reasonable steps to protect the security of the personal electronic device through which you access the Services (including, without limitation, using pin and/or password protected personally configured device functionality to access the Services and not sharing your device with other people)."

Paypal denied it was banning account users sharing their computers.

A spokesman said: "The new wording in our User Agreement says that users should take reasonable care when sharing devices so their PayPal account is not compromised."

Meanwhile, the celebrated children's author Allan Ahlberg revealed he turned down a lifetime achievement award after learning it was sponsored by Amazon.

In a letter to the Bookseller, he complained about Amazon's UK tax arrangements, whereby revenue earned in Britain is accounted for in low-tax Luxembourg.

Amazon's UK subsidiary reached sales of £4.3bn last year but it paid only £4.2m in tax.

Amazon.co.uk saw a 56% rise in profit to £17m during 2013, along with a 13% rise in UK revenue.

Mr Ahlberg wrote: "Tax, fairly applied to us all, is a good thing. It pays for schools, hospitals - libraries!

"When companies like Amazon cheat - paying 0.1% on billions, pretending it is earning money not in the UK, but in Luxembourg - that's a bad thing.

"We should surely, at the very least, say that it is bad and on no account give it any support or, by association, respectability."

Approached by Sky News, Amazon UK declined to comment on Mr Ahlberg's action and it was awaiting a response from the US parent firm about the FTC action.

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