The FTC files suit alleging unfair practices the same day Amazon had to change its pricing on books and shipping in France to comply with a new law there.
Amazon.com Inc.’s lawyers have, no doubt, been busy recently.
The U.S. Federal Trade Commission yesterday sued the largest e-retailer in North America and Europe, alleging Amazon engaged in unfair or deceptive practices when the Amazon Appstore allowed users to rack up charges in apps downloaded from the Appstore without getting consent from the Amazon account holder. The FTC announced the suit the same day a law in France, dubbed the “Anti-Amazon Law,” which disallows any web-only e-retailer from selling books to consumers in France at less than list price, went into effect.
The FTC suit alleges Amazon failed to get explicit consent from the Amazon account holder when an app user made an in-app purchase. This, the FTC says, led to Amazon charging account holders without their knowledge. The FTC points specifically to in-app purchases made by children playing games. The FTC says Amazon did not, beginning with the launch of the Amazon Appstore in November 2011, require users to enter a password to authorize in-app purchases at the time of purchase. The FTC says in March 2012 Amazon added a password authorization for in-app charges greater than $20, and in early 2013 began requiring password authorization for smaller in-app purchases, but that sometimes unclear language led to consumers authorizing more charges than they thought.
Amazon had met with the FTC about its in-app purchasing in the weeks leading up the suit being filed. Amazon says the FTC wanted it to follow an agreement modeled after the agreement Apple Inc. came to with the FTC in January over in-app purchases, and Amazon declined to do that. In the FTC settlement with Apple, No. 2 in the Top 500 Guide, Apple agreed to pay a minimum of $32.5 million in refunds to consumers, and was required to change its billing practices to get express, informed consent from consumers before charging them for purchases in mobile apps.
“It’s an understatement to say that this response is deeply disappointing,” says Andrew C. DeVore, Amazon vice president and associate general counsel, in a letter to FTC chairwoman Edith Ramirez, referring to the FTC choosing to file suit against Amazon. “The Commission’s unwillingness to depart from the precedent it set with Apple despite our very different facts leaves us no choice but to defend our approach in court.”
The letter goes on to say that Amazon’s practices were lawful from the launch of in-app purchasing, and that it has continued to improve on how in-app purchases work. It also says it has refunded consumers when they’ve complained about unauthorized in-app purchases.
“In-app purchasing was and remains a new and rapidly evolving segment, and we have consistently improved the customer experience in response to data,” DeVore writes. “That constant iteration on behalf of customers has produced not only an in-app purchasing experience that already meets the requirements of the Apple consent order, but the development of industry-leading parental controls like Kindle Free Time. We believe the Commission should promote that kind of iteration on behalf of customers.”
In France, Amazon this week had to change its pricing on books and shipping to accommodate a law France’s parliament passed on June 25 and that went into effect yesterday. The law prohibits Amazon and other web-only retailers from offering books below list price. It also prohibits any web-only bookseller from shipping book orders for free.
When the bill was introduced earlier this year, French senators said their motivation to update the law came from “alarming” statistics on independent book store closures and sales declines over the last several years. Specifically, they cited a 10% year-over-year decrease in the sale of books at French independent stores in November 2013 and data showing that Amazon commands 70% of the book market in France.
A French law from 1981 restricts booksellers from discounting books more than 5%. Booksellers with stores can continue to apply a discount to online orders if the buyer comes to the store to pick up the order. Amazon.fr now prices books at list price and is offering shipping for one cent.
Separately, Amazon in the United States continues to duke outbook pricing disputes with publisher.