Google pays $19 million to settle claims that it deceived kids into buying Android apps

Yesterday, Google agreed with the Federal Trade Commission to pay $19 million to consumers whose children allegedly were misled into making purchases in the Android "app store." As this article by Cecilia Kang explains:

Google made it too easy for children to use Android phones to buy items ranging from 99 cents to $200 in kids-oriented games without a parent's permission. The settlement is the latest in the FTC's three-year investigation into so-called "in-app purchases" on devices running software by Apple, Amazon and Google. The enforcement agency has said the purchases are deceptive and particularly harmful for children. Apple agreed to a $32.5 million settlement last January. Amazon in July said it would fight similar charges brought by the FTC.

Read the FTC's press release, and take a look at what the agency calls its 4 tips that app sellers should take away from the Google settlement:

1)  Get consumers’ express consent before billing them.  It’s hardly a novel concept, but it bears repeating:  It’s illegal to place charges on consumers’ accounts without their permission.  That was the law before the advent of mobile apps and we’ll go out on a limb and say the same principle will apply to The Next New Thing.  Regardless of what you sell or how you sell it, get people’s informed OK before billing them.

2)  Read – and heed – your mail.  According to the complaint, Google started to get flak from consumers almost as soon as it introduced in-app purchases in kids’ apps.  The FTC’s complaint cites just a few of the thousands of communications from parents that should have made it crystal-clear to Google that it had a problem on its hands.  What’s the message for marketers?  One insightful – and free – gauge of what’s going on in the marketplace is what your customers are telling you.

3)  Listen to your staff.  It wasn’t just parents who expressed concerns.  In a 2012 email, one Google product manager warned higher-ups that:

“friendly fraud” (unauthorized purchases by individuals you know) is the lead cause of chargebacks.  For example, parents realize their kids have made a series of purchases and call the credit card company claiming those were unauthorized.  Risk estimates that close to 80% of current chargebacks are driven by this specific issue.

Another in-house communication referred to a “high number of canceled orders for in-app billing” and explained that “these usually tend to be family fraud (kids takes phone and buys lots of food for virtual fish).”  Remember:  Those weren’t quotes from someone with an axe to grind.  It’s what Google’s own people were saying about problems with the payment process.

4)  Nix the trick fix.  Once you know there’s a problem, commit your company to correct it pronto.  It’s unlikely that half-hearted measures will do the trick.  As the complaint in this case alleges, the changes Google implemented didn’t solve the problem.

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