Statement of Chairwoman Edith Ramirez and Commissioner Julie Brill 

In the Matter of Apple Inc.

FTC File No. 1123018 

January 15, 2014

 

The Commission has issued a complaint and proposed consent order to resolve 

allegations that Apple Inc. unfairly failed to obtain informed consent for charges incurred by 

children in connection with their use of mobile apps on Apple devices in violation of Section 5 

of the Federal Trade Commission Act. Consistent with prior application of the Commission’s 

unfairness authority, our action today reaffirms that companies may not charge consumers for 

purchases that are unauthorized – a principle that applies regardless of whether consumers are in 

a retail store, on a website accessed from a desktop computer, or in a digital store using a mobile 

device. 

As alleged in the Commission’s complaint, Apple violated this basic principle by failing 

to inform parents that, by entering a password, they were permitting a charge for virtual goods or 

currency to be used by their child in playing a children’s app and at the same time triggering a 

15-minute window during which their child could make unlimited additional purchases without 

further parental action. As a consequence, at least tens of thousands of parents have incurred 

millions of dollars in unauthorized charges that they could not readily have avoided. Apple, 

however, could have prevented these unwanted purchases by including a few words on an 

existing prompt, without disrupting the in-app user experience. As explained below, we believe 

the Commission’s allegations are more than sufficient to satisfy the standard governing the FTC 

Act’s prohibition against “unfair acts or practices.” 

I. Overview of In-App Purchases on Apple Mobile Devices 

Apple distributes apps, including games, that are likely to be used by children on Apple 

mobile devices through its iTunes App Store. While playing these games, kids may incur 

charges for the purchase of virtual items such as digital goods or currency (known as “in-app 

charges”) at prices ranging from $.99 to $99.99. These in-app charges are billed to their parents’ 

iTunes accounts. Apple retains thirty percent of the revenues from in-app charges. As part of 

the in-app purchasing process, Apple displays a general prompt that calls for entry of the 

password for the iTunes account associated with the mobile device. Apple treats this password 

entry as authorizing a specific transaction and simultaneously allowing additional in-app 

purchases for 15 minutes. 

While key aspects of the in-app purchasing sequence have changed over time, as 

described in the Commission’s complaint, one constant has been that Apple does not explain to 

parents that entry of their password authorizes an in-app purchase and also opens a 15-minute 

window during which children are free to incur unlimited additional charges. We allege that, 

since at least March 2011, tens of thousands of consumers have complained about millions of 

dollars in unauthorized in-app purchases by children, with many of them individually reporting 

hundreds to thousands of dollars in such charges. As a result, we have reason to believe, and 

have alleged in our complaint, that Apple’s failure to disclose the 15-minute window is an unfair 
2 

practice that violates Section 5 because it has caused or is likely to cause substantial consumer 

injury that is neither reasonably avoidable by consumers nor outweighed by countervailing 

benefits to consumers or competition.1

The proposed consent order resolves these allegations by requiring Apple to obtain 

informed consent to in-app charges. The order also requires Apple to provide full refunds, an 

amount no less than $32.5 million, to all of its account holders who have been billed for 

unauthorized in-app charges incurred by minors.2 

II. Application of the Unfairness Standard 

Importantly, the Commission does not challenge Apple’s use of a 15-minute purchasing 

window in apps used by kids. Rather, our charge is that, even after receiving at least tens of 

thousands of complaints about unauthorized charges relating to in-app purchases by kids, Apple 

continued to fail to disclose to parents and other Apple account holders that entry of a password 

in a children’s app meant they were approving a single in-app charge plus 15 minutes of further, 

unlimited charges. 

In asserting that Apple violated Section 5’s prohibition against unfair practices by failing 

to obtain express informed consent for in-app charges incurred by kids, we follow a long line of 

FTC cases establishing that the imposition of unauthorized charges is an unfair act or practice.3

 

This basic tenet applies regardless of the technology or platform used to bill consumers and 

regardless of whether a company engages in deliberate fraud. Indeed, there is nothing in the 

unfairness authority we have been granted by Congress or in the Commission’s Unfairness 

Policy Statement to suggest that our power is in any way constrained or should be applied 

differently depending on the technology or platform at issue, or the intentions of the accused 

party.4

Our task here, as in all instances in which we assert jurisdiction over unfair acts or 

practices, is to determine whether the alleged unlawful conduct causes or is likely to cause 

substantial injury that is not reasonably avoidable by consumers and is not outweighed by 

countervailing benefits to consumers or competition. After a full investigation, we have reason 

to believe that Apple’s conduct constitutes an unfair practice. 

 

 

1

 15 U.S.C. § 45(n). 

2

 Any sum below $32.5 million that is not returned to account holders is to be paid to the FTC. 

3 See, e.g., FTC v. Willms, No. 2:11-CV-828 MJP, 2011 WL 4103542, at *9 (W.D. Wash. Sept. 13, 2011); FTC v. 

Inc21.com Corp., 745 F. Supp. 2d 975 (N.D. Cal. 2010), aff’d, 475 Fed. Appx. 106 (9thCir. Mar. 30, 2012); FTC v. 

Crescent Publ’g Grp., Inc., 129 F. Supp. 2d 311, 322 (S.D.N.Y. 2001); see also Complaint, FTC v. Jesta Digital, 

LLC, No. 1:13-cv-01272 (D.D.C. filed Aug. 20, 2013). 4

 The FTC need not prove intent to establish a violation of the FTC Act. See, e.g., Orkin Exterminating Co. v. FTC, 

849 F.2d 1354, 1368 (11th Cir. 1988); Federal Trade Commission Policy Statement on Unfairness, appended to Int’l 

Harvester Co., 104 F.T.C. 949, 1070 (1984) (“FTC Unfairness Statement”). 
3 

A. Substantial Injury to Consumers 

 We begin by addressing the issue of harm. It is well established that substantial injury 

may be demonstrated by a showing of either small harm to a large number of people or large 

harm in the aggregate.5

 Both are present here. As alleged in the complaint, in many individual 

instances, Apple customers paid hundreds of dollars in unauthorized charges while thousands of 

others incurred lower charges that together totaled large sums. We allege that, in the aggregate, 

at least tens of thousands of consumers have complained of millions of dollars of unauthorized 

in-app charges by children. Moreover, we have reason to believe that, for a variety of reasons, 

many more affected customers never complained. Some, for example, were undoubtedly 

deterred by Apple’s stated policy that all App Store transactions are final. Others who incurred 

low charges likely did not protest because of the relatively small dollar value at issue. Indeed, 

extensive Commission experience teaches that consumer complaints typically represent only a 

small fraction of actual consumer injury.6

In his dissent, Commissioner Wright expresses the view that the harm alleged by the 

Commission involves “a miniscule percentage of consumers” and is therefore insubstantial.7

 We 

respectfully disagree. We find it of little consequence that the number of complainants is a small 

fraction of all app downloads, as Commissioner Wright asserts.8 As an initial matter, our 

complaint focuses on conduct affecting Apple account holders whose children may unwittingly 

incur in-app charges in games likely to be played by kids. The proportion of complaints about 

children’s in-app purchases as compared to total app downloads, revenue from the sale of Apple 

mobile devices, or Apple’s total sales revenue sheds no light on the extent of harm alleged in this 

case. More fundamentally, the FTC Act does not give a company with a vast user base and 

product offerings license to injure large numbers of consumers or inflict millions of dollars of 

harm merely because the injury affects a small percentage of its customers or relates to a fraction 

of its product offerings. 

It is also incorrect that “in order to qualify as substantial, the harm must be large 

compared to any offsetting benefits.”9 This conflates the third prong of the unfairness test, 

calling for a weighing of countervailing benefits against the relevant harm, with the substantial 

injury requirement. As shown above, the allegations in the complaint are more than sufficient to 

establish substantial injury.10 

 

5 See FTC v. Neovi, Inc., 604 F.3d 1150, 1157 (9th Cir. 2010), amended, 2010 WL 2365956 (9th Cir. June 15, 

2010); Orkin, 849 F.2d at 1365; FTC Unfairness Statement n.12. 6

 Likewise, there is research indicating consumers do not register the vast majority of their complaints about 

problems with goods and services. See Amy J. Schmitz, Access to Consumer Remedies in the Squeaky Wheel 

System, 39 PEPP. L. REV. 279, 286 (2012). 7

 Dissenting Statement of Commissioner Joshua D. Wright (“Wright Dissent”) at 1. 

8 See id. at 6. 9 Id. (citation and internal quotation marks omitted). 10 See, e.g., Orkin, 849 F.2d at 1365 (substantial injury demonstrated by small injury to large number of customers);

FTC v. Neovi, Inc., 598 F. Supp. 2d 1104, 1115 (S.D. Cal. 2008) (substantial consumer injury resulted from 

unauthorized charges to tens of thousands of consumers), aff’d, 604 F.3d 1150 (9th Cir. 2010); FTC v. Global Mktg. 

Group, Inc., 594 F. Supp. 2d 1281, 1288-89 (M.D. Fla. 2008) (millions of dollars in unlawful charges demonstrated 
4 

B. Injury Not Reasonably Avoidable by Consumers 

We also have reason to believe that consumers could not reasonably avoid the alleged 

injury. An injury is not reasonably preventable by consumers unless they had an opportunity to 

make a “free and informed choice” to avoid the harm.11 Before billing parents for in-app charges 

by children, Apple presented parents with a generic password prompt devoid of any explanation 

that password entry approves a single charge as well as all charges within the 15 minutes to 

follow. We do not think parents acted unreasonably by not averting harm from a 15-minute 

window that was not disclosed to them. Consumers cannot avoid or protect themselves from a 

practice of which they are not made aware, and companies like Apple cannot impose on 

consumers the responsibility for ferreting out material aspects of payment systems, as FTC 

enforcement actions in a variety of contexts make clear.12 Apple’s disclosure of the 15-minute 

window in its Terms and Conditions was not sufficient to provide consumers with adequate 

notice. 

Over time, through experience, some parents may infer that entry of a password opens a 

15-minute window during which unlimited purchases can be made. The receipt of an invoice 

with unauthorized charges may be sufficient to alert some parents about the unwanted charges. 

But that does not relieve Apple of the obligation to take reasonable steps to inform consumers of 

the 15-minute window before the user opens that window and before Apple places charges on a 

bill. In light of Apple’s failure to disclose the 15-minute purchasing window, it was reasonable 

for parents not to expect that when they input their iTunes password they were authorizing 15 

minutes of unlimited purchases without the child having to ask the parent to input the password 

again. There was nothing to suggest this and thus no “obligation for them to investigate further” 

as Commissioner Wright suggests.13 

C. Injury Not Outweighed by Benefits to Consumers or Competition 

Finally, we also have reason to believe that the harm alleged outweighs any 

countervailing benefits to consumers or competition from Apple’s practices. This is not a case 

about Apple’s “choice to integrate the fifteen-minute window into Apple users’ experience on 

the platform,” as Commissioner Wright implies.14 What is at issue is Apple’s failure to disclose 

the 15-minute window to parents and other account holders in connection with children’s apps, 

not Apple’s use of a 15-minute window as part of the in-app purchasing sequence. 

 substantial injury); FTC v. Windward Mktg., Inc., No. 1:96-CV-615F, 1997 WL 33642380, at *11 (N.D. Ga. Sept. 

30, 1997) (harm to large number of consumers sufficient to establish substantial injury). 11 Neovi, 598 F. Supp. 2d at 1115. 12 See, e.g., Facebook, Inc., No. C-4365, at 4 (F.T.C. July 27, 2012) (consent order) (requiring “clear and prominent” 

disclosure of certain information material to privacy protections “separate and apart from” the detailed privacy 

policy or terms of use); Google Inc., No.C-4336, at 3-4 (F.T.C. Oct. 13, 2011) (consent order) (setting similar 

requirements). 

13 Wright Dissent at 10. 

14 Id. at 4. 
5 

Under the proposed consent order, Apple is permitted to bill for multiple charges within a 

15-minute window upon password entry provided it informs consumers what they are 

authorizing, allowing consumers to make an informed choice about whether to open a period 

during which additional charges can be incurred without further entry of a password.15 The order 

gives Apple full discretion to determine how to provide this disclosure. But we note that the 

information called for, while important, can be conveyed through a few words on an existing 

prompt. The burden, if any, to users who have never had unauthorized charges for in-app 

purchases, or to Apple, from the provision of this additional information is de minimis.

16 Nor do 

we believe the required disclosure would detract in any material way from a streamlined and 

seamless user experience. In our view, the absence of such minimal, though essential, 

information does not constitute an offsetting benefit to Apple’s users that even comes close to 

outweighing the substantial injury the Commission has identified. 

Moreover, we are confident that our action today fully preserves the incentive to innovate 

and develop digital platforms that are user-friendly and beneficial for consumers. In this respect, 

we emphasize that we do not expect companies “to anticipate all things that might go wrong” 

when designing a complicated platform or product.17 Our action against Apple is based on its 

failure to provide any meaningful disclosures about the 15-minute window in the purchase 

sequence, despite receiving at least tens of thousands of complaints about unauthorized in-app 

purchases by children and despite having the issue flagged in high-profile media reports in late 

2010 and early 2011.18 We recognize that Apple did make certain changes to its in-app purchase 

sequence in an attempt to resolve the issue. Most notably, Apple added a password prompt to 

the in-app purchase sequence in March 2011. But for well over two-and-a-half years after that 

point, the password prompt has lacked any information to signal that the account holder is about 

to open a 15-minute window in which unlimited charges could be made in a children’s app. 

The extent and duration of the unauthorized in-app charges alleged in the complaint 

support our conclusion that, while Apple has strong incentives to cultivate customer goodwill in 

order to encourage the purchase of in-app goods and currency and promote the sale of its mobile 

devices, these incentives may not be sufficient to produce the necessary disclosures. Because 

customers are often unaware of the way in-app charges work, let alone the possibility of Apple 

disclosing its practices, we do not think that Commissioner Wright’s belief that Apple “has more 

than enough incentives to disclose”19 is justified. Indeed, his argument appears to presuppose 

that a sufficient number of Apple customers will respond to the lack of adequate information by 

 

15 See Proposed Order ¶¶ 3, 5 (defining “Clear and Conspicuous” and “Express, Informed Consent”). 16 For this reason alone, it was unnecessary for the Commission to undertake a study of how consumers react to 

different disclosures before issuing its complaint against Apple, as Commissioner Wright suggests. We also note 

that the Commission need only determine that it has a “reason to believe” that there has been an FTC Act violation 

in order to issue a complaint. 15 U.S.C. § 45(b). 

17 Wright Dissent at 15 (emphasis in original). 

18 See, e.g., Cecilia Kang, In-app purchases in iPad, iPhone, iPod kids’ games touch off parental firestorm, WASH.

POST, Feb. 8, 2011, available at http://www.washingtonpost.com/wpdyn/content/article/2011/02/07/AR2011020706073.html; Associated Press, Apple App Store: Catnip for FreeSpending Kids?, CBS NEWS, Dec. 9, 2010, available at http://www.cbsnews.com/news/apple-app-store-catnip-forfree-spending-kids/. 19 Wright Dissent at 14. 
6 

leaving Apple for other companies. But customers cannot switch suppliers easily or quickly. 

Mobile phone and data contracts typically last two years, with a penalty for early termination. In 

addition, the time and effort required to learn another company’s operating system and features, 

not to mention the general inertia often observed for consumers with plans for cellular, data, and 

Internet services, could very well mean that Apple customers may not be as responsive to 

Apple’s disclosure policies as seems to be envisioned by Commissioner Wright. 

* * * 

We applaud the innovation that is occurring in the mobile arena. Today, parents have 

access to an enormous number and variety of apps for use by their children. We firmly believe 

that technological innovation and fundamental consumer protections can coexist and, in fact, are 

mutually beneficial. Such innovation is enhanced, and will only reach its full potential, if all 

marketplace participants abide by the basic principle that they must obtain consumers’ informed 

consent to charges before they are imposed.