Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—W.D. Wash.: Amazon unable to dodge FTC’s claims over in-app purchases, (Dec 2, 2014)

By Greg Hammond, J.D.

Amazon.com, Inc. could not obtain dismissal of claims that it violated Section 5 of the FTC Act by billing parents and account holders for in-app purchases incurred by children without parental consent. The federal district court in Seattle denied Amazon’s motion to dismiss, finding that the FTC stated sufficient facts to create a plausible claim for relief under the FTC Act (FTC v. Amazon.com, Inc., December 1, 2014, Coughenour, J.).

Background. Amazon operates an Appstore where consumers can download apps for their Android mobile devices or Kindle Fire tablets. The Commission filed suit against Amazon, alleging that the billing of parents and other account holders for in-app purchases incurred by children without having obtained the account holders’ expressed informed consent is unlawful under Section 5 of the FTC Act. Amazon moved to dismiss, arguing (1) the Commission’s use of the phrase “express informed consent” attempts to create a new legal standard, and (2) because in-app purchases were made by children with actual or apparent authority, the complaint fails to satisfy the requirements of the FTC Act.

Express informed consent. Despite Amazon’s arguments that the Commission’s use of the phrase “express informed consent” will hold the company to a new and unjustified legal standard, the court concluded that there is no meaningful legal difference between the terms “authorization” and “express informed consent.” The court therefore concluded that the phrase does not represent a new legal standard, and the more appropriate question is whether the complaint pleads sufficient facts to state a claim under Section 5 of the FTC Act.

Plausible claim. In support of its motion to dismiss, Amazon argued that the disputed in-app purchases were unauthorized under agency principles. The court, however, concluded that considering an agency relationship between account holders and child users would not be appropriate, and therefore declined to extend apparent authority to child users. In addition, the court found: (1) the complaint stated a plausible claim that Amazon customers suffered substantial harm due to billing of in-app purchases by children; (2) factual questions remained about how well informed consumers were about which apps included in-app purchasing; (3) the complaint stated sufficient facts to state a plausible claim that the injury to Amazon’s customers was not reasonably avoidable; and (4) there were sufficient facts to find it plausible that customers’ injuries were not outweighed by any countervailing benefits.

The case number is C14-1038-JCC.

Attorneys: Laura Marie Solis, Federal Trade Commission. David J. Burman (Perkins Coie) and J. Douglas Baldridge (Venable LLP) for Amazon.com, Inc.

Companies: Amazon.com, Inc.

Cases: ConsumerProtection WashingtonNews