The FTC ruled that Apple is responsible for money spent by children who, possibly unwittingly, trick their parents into approving in-app game purchases by asking them to fill in their password when prompted. When kids show their parents the password prompt, a message explaining that entering the password will finalize the purchase doesn't appear, so parents are often not aware of the implications of entering their passwords.
Password entry also gives kids an extra 15 minutes of free shopping time, making the password a kind of time-limited blank check for the savvy child. And some kids spent a lot of money on games, according to the Washington Post:
Over the winter break from school, 8-year-old Madison worked to dress up her simple mushroom home on the iPhone game Smurfs' Village. In doing so, she also amassed a $1,400 bill from Apple.... Arlington second-grader Leyla Ulku figured out her parents' password and recently racked up a $150 charge from buying buckets of stars and snowflakes to build a safari out of sea turtles and giraffes on Tap Zoo.
Parents argue that in-app downloads are misleading to children, most of whom are used to paying for items with fake money online, and that they are inappropriately priced. Some game items are surprisingly expensive — like a $99 wagon of Smurfberries, which doesn't really seem like the type of purchase a consenting adult would make.
The FTC also cited some exorbitant purchases:
In its complaint, the FTC notes that Apple received at least tens of thousands of complaints about unauthorized in-app purchases by children. One consumer reported that her daughter had spent $2,600 in the app “Tap Pet Hotel,” and other consumers reported unauthorized purchases by children totaling more than $500 in the apps “Dragon Story” and “Tiny Zoo Friends.” According to the complaint, consumers have reported millions of dollars in unauthorized charges to Apple.
In addition to reimbursing parents, Apple will have to "modify its billing practices to ensure that Apple obtains consumers’ express, informed consent prior to billing them for in-app charges, and that if the company gets consumers’ consent for future charges, consumers must have the option to withdraw their consent at any time." FTC chairwoman Edith Ramirez called the settlement a triumph, saying:
This settlement is a victory for consumers harmed by Apple’s unfair billing, and a signal to the business community: whether you’re doing business in the mobile arena or the mall down the street, fundamental consumer protections apply... You cannot charge consumers for purchases they did not authorize.
Apple, for its part, issued a rather beaten-down (but non-apologetic) response, saying they'd prefer to settle instead of engaging in a "long legal fight."According to the FTC, the Apple settlement is a part of a larger consumer safety initiative.
Correction: An earlier version of this post mistakenly cited a $32.5 billion fine for Apple. The correct figure is $32.5 million.