Apple to pay at least $32.5M over kids’ in-app purchases

iphone5goldApple will enter into a consent decree with the Federal Trade Commission to refund users for unauthorized charges incurred within apps targeting children, totaling at least $32.5 million, regulators announced this morning.

Although Apple settled a lawsuit last year over the marketing of in-app purchases to children, the FTC consent decree seeks to ensure that the company will work to change the system, which the FTC alleges allowed children to rack up millions of dollars in unauthorized charges.

FTC Chairwoman Edith Ramirez emphasized in a press conference that there is no ceiling on the amount of money Apple will have to pay back.

At issue is the fact that Apple did not notify users that authorizing a purchase from the App Store opened a 15-minute window in which purchases wouldn’t require a password. As a part of the decree, Apple must add a notification of the 15-minute window to the purchase process by March of this year.

Until Apple adds a notification, users will still be eligible for full refunds from the company for any unauthorized purchases.

Still, there’s a lot that remains unclear about the FTC’s decree. Ramirez, when asked, didn’t provide a justification for the $32.5 million figure, other than to say that the FTC alleges that Apple’s lack of a notification cost users millions of dollars. Meanwhile, Apple hasn’t yet said whether it plans to eat the cost of the refunds it issues, or pass them on to developers.

While Apple doesn’t seem to be happy about the settlement, it was apparently a better option than facing another lawsuit.

“It doesn’t feel right for the FTC to sue over a case that had already been settled,” Apple CEO Tim Cook wrote in an internal Apple memo obtained by Re/code. “To us, it smacked of double jeopardy. However, the consent decree the FTC proposed does not require us to do anything we weren’t already going to do, so we decided to accept it rather than take on a long and distracting legal fight.”

In a statement issued this morning, Ramirez and FTC Commissioner Julie Brill hailed the settlement.

“We applaud the innovation that is occurring in the mobile arena. Today, parents have access to an enormous number and variety of apps for use by their children. We firmly believe that technological innovation and fundamental consumer protections can coexist and, in fact, are mutually beneficial. Such innovation is enhanced, and will only reach its full potential, if all marketplace participants abide by the basic principle that they must obtain consumers’ informed consent to charges before they are imposed.”

The FTC didn’t present a united front, though. Commissioner Joshua D. Wright dissented, saying that the commission “has no foundation upon which to base a reasonable belief that consumers would be made better off if Apple modified its disclosures to confirm to the parameters of the consent order.”

Ramirez declined to say whether the FTC has any plans to go after other tech companies, or the developers of apps that target kids with in-app purchases, though she reiterated that the commission is taking a very close look at the evolving mobile industry.