Amazon Lawsuit May Signal Next Chapter in the Evolution of FTC Enforcement Actions

Published: Jul. 18, 2014

Last Updated: Oct. 05, 2020

The Federal Trade Commission’s (“FTC”) recent filing of a complaint in federal district court against (“Amazon”) may signal the next chapter in the evolution of its enforcement actions. Historically, most subjects of enforcement actions have opted to settle with the FTC rather than pursue litigation in federal court or an administrative proceeding. This trend, however, seems to be shifting, as Amazon joins a growing list of companies that have contested the FTC’s allegations rather than negotiate a consent decree. T-Mobile also recently refused to settle an FTC action alleging that it had charged consumers for unwanted services, and Wyndham and LabMD have challenged not only the FTC’s allegations but also its underlying authority to regulate data security practices under the FTC Act. For more information about these cases see LabMD Refuses to Settle FTC Unfairness Case, Following Wyndham.

In this case, the FTC alleges that Amazon engaged in unfair trade practices under Section 5 of the FTC Act when it billed parents and other Amazon account holders for children’s in-app purchases without first obtaining the adult’s permission. When Amazon introduced in-app purchases to the Amazon Appstore, kids’ games and other apps that appealed to children did not contain password requirements, so children could incur charges in those apps without a parent’s authorization. The FTC contends that even after Amazon instituted a password requirement issues remained, because it was often unclear within the games which virtual items cost real money rather than virtual currency. According to the FTC, Amazon continued to bill parents for these charges despite receiving complaints from parents and account holders. The FTC also claims that the refund process, which was only available in exceptional circumstances, was difficult to navigate. The FTC alleges that Amazon’s practices caused or were likely to cause injury to consumers, and seeks disgorgement of the unauthorized charges with equitable relief. When Amazon refused to settle and enter into a consent decree, the FTC filed its complaint in the Western District of Washington.

Whether Amazon’s decision to push back on the FTC indicates a broader trend or is limited to this particular situation remains to be seen. Having an industry leader that will take its chances litigating the factual merits in court (which is distinct from Wyndham’s and LabMD’s arguments about whether the FTC has authority to pursue its claims) may embolden other companies that feel unjustifiably targeted or unfairly penalized by the FTC’s efforts.

Feature Photo by Marcus Kwan from Flickr