Children and in-app purchases: regulatory history and practical defenses

The legal landscape was shaped by multi-million-dollar FTC enforcement actions.

Between 2014 and 2016, the U.S. Federal Trade Commission settled with the three largest app store operators (Apple, Google, and Amazon) over allegations that the companies billed parents for purchases made by children without explicit authorization. The settlements established the precedent that platforms must take reasonable steps to verify that purchases — particularly in-app purchases following an initial transaction — are authorized.

FTC announcement of the Apple settlement: "Apple will pay a minimum of $32.5 million in refunds to consumers for unauthorized in-app charges incurred by children… The company will be required to obtain consumers' express, informed consent prior to billing them for in-app charges." — U.S. Federal Trade Commission. (January 15, 2014). "Apple Inc. Will Provide Full Consumer Refunds of at Least $32.5 Million to Settle FTC Complaint It Charged for Kids' In-App Purchases Without Parental Consent."

The structural problem the FTC's actions addressed is one of payment friction (the same mechanism Soman identified in adult-context payment research; see Forgotten subscriptions). When a child taps an in-app purchase button shortly after a parent has authenticated a previous purchase, no fresh authentication is required — and the design of the in-app interface specifically encourages tapping.

Practical defenses

Modern app store settings allow parents to require authentication for every purchase (rather than relying on a post-authentication window) and to require parental approval for all child-account purchases. Configuring these settings reduces but does not eliminate the risk; the FTC's enforcement history is the reason platforms now offer the controls.

For accidental charges that do occur: app stores typically refund kid-initiated in-app charges if contacted within a reasonable window. The FTC's settlement records support these refunds.

References

• U.S. FTC. (2014). In the Matter of Apple Inc. (Settlement).
• U.S. FTC. (2014). FTC v. Amazon.com, Inc. (Complaint).
• U.S. FTC. (2014). In the Matter of Google Inc. (Settlement).

Related: Kids financial literacy · Family streaming · Free trial scam