Google to refund at least $19 million to Settle FTC Complaint It Unlawfully Billed Parents for Children’s Unauthorized In-App Charges

FTC Order Requires Google to Change Its Mobile App Billing Practices to Ensure Consumers’ Consent Is Obtained Before Charges Levied

For Release

September 4, 2014

Google Inc. has agreed to settle a Federal Trade Commission complaint alleging that it unfairly billed consumers for millions of dollars in unauthorized charges incurred by children using mobile apps downloaded from the Google Play app store for use on Android mobile devices. Under the terms of the settlement, Google will provide full refunds – with a minimum payment of $19 million – to consumers who were charged for kids’ purchases without authorization of the account holder. Google has also agreed to modify its billing practices to ensure that it obtains express, informed consent from consumers before charging them for items sold in mobile apps.

The Commission’s complaint against Google alleges that since 2011, Google violated the FTC Act’s 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, smartphones 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.”

This marks the Commission’s third case concerning unauthorized in-app charges by children. In January, the Commission 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 – and obtain express, informed consent for in-app charges. And in July, the Commission filed a complaint in federal court against Amazon.com, Inc., similarly seeking full refunds for consumers and an order requiring informed consent for in-app charges.

In-app charges are a component 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, though as the FTC’s complaint notes, the lines between virtual money purchases and real money purchases can be blurred. The FTC’s complaint alleges that Google billed consumers for many such charges by children without obtaining account holders’ authorization, leaving consumers holding the bill.

When Google first introduced in-app charges to the Google Play store in 2011, the complaint alleges, 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 popup boxes within the app as they used it.

According to the complaint, in mid- to late 2012, Google began presenting a pop-up box that asked for the account holder’s password before billing in-app charges. The new pop-up, however, 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, many thousands of consumers complained to Google about children making unauthorized in-app charges, according to the complaint. Some parents noted that their children had spent hundreds of dollars in in-app charges without their consent. Others noted that children buying virtual in-game items with real money were unaware they were causing their parents to be billed.

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, according to the complaint. The complaint further alleges that Google’s practice has been to refer consumers seeking refunds first to the app developer.

The settlement will require Google to provide full refunds of unauthorized in-app charges incurred by children and to modify its billing practices to obtain express, informed consent from consumers before billing them for in-app charges. If the company gets consumers’ consent for future charges, consumers must have the option to withdraw their consent at any time.

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 Commission for use in providing additional remedies to consumers or for return to the U.S. Treasury.

Digital Commerce Provider Handles More Than Just Payments and Provides Software Vendor with Additional Flexibility to Sell Globally

Redwood City, CA – September 09, 2014 – Avangate, the leading Digital Commerce solution provider trusted by thousands of Software and Online Services companies to grow their business worldwide in the new Services Economy, today announced that it has helped PerfectTablePlan save hours of administration time and reach customers in over 140 countries.

PerfectTablePlan is an innovative software company that helps people plan seating arrangements for all kinds of events, from wedding receptions to charity fundraisers. When the company exceeded the revenue threshold to register for VAT in the European Union, founder Andy Brice realized he would need to deal with VAT and other tedious administrative details. PerfectTablePlan surveyed various software vendors to find a new payment solution with responsive support and commerce capabilities, and Avangate emerged as the first choice.

“It was nice to reach the threshold for VAT registration, but VAT is a pain – especially when you have customers all around the world,” said Andy Brice, founder of PerfectTablePlan. “I really want to focus on providing a great service for my customers without thinking too much about VAT and credit card processing, so I switched my payment processing to Avangate. They now help us to comply with EU legislation around VAT and much more, which saves hours of tedious admin every month and gives PerfectTablePlan the flexibility to tackle a global market, with sales to 140 countries to date.”

Previously, PerfectTablePlan had used a payment provider with limited support for global payments, unresponsive customer support, and minimal shopping cart functionality. By switching to Avangate, PerfectTablePlan was able to focus on serving its customers better and improve internal efficiencies.

“Many software vendors struggle to manage VAT and that is only part of the problem. Dealing with payments quickly becomes complex,” said Joseph Brown, Avangate SVP of Worldwide Sales. “Our approach goes even further, beyond payments, to provide a complete commerce solution that includes flexible invoicing, country-specific payments, automation, digital goods specific sales features, tools for increasing conversion rates as well as additional sales or marketing channels.”

For more information on how the software company benefited from working with Avangate, view the customer case study on PerfectTablePlan.

Following a public comment period, the Federal Trade Commission has approved final orders settling charges against Fandango, Inc. and Credit Karma, Inc.

According to the FTC’s complaints, the companies’ mobile apps left consumers’ sensitive personal information, including credit card information and Social Security numbers, vulnerable to interception by third parties. Among other things, the complaints allege that the companies disabled a process called SSL certificate verification that would have protected consumers’ information.

The settlements, first announced in March 2014, require Fandango and Credit Karma to establish comprehensive security programs designed to address security risks during the development of their applications and to undergo independent security assessments every other year for the next 20 years. The settlements also prohibit Fandango and Credit Karma from misrepresenting the level of privacy or security of their products and services.