Apple Rushes to Make FTC-Mandated Changes to App Store

App Store 2008

Apple (NASDAQ:AAPL) is required to change how its App Store handles in-app purchases by March 31 in order to comply with the terms of a settlement it reached with the Federal Trade Commission. As noted by the FTC, the changes were agreed upon in order to settle consumer complaints against Apple regarding inadvertent in-app purchases. Consumers were billed for millions of dollars of charges that were incurred by children who made in-app purchases while using various kids’ mobile apps.

The unwanted charges were enabled by Apple’s policy of allowing in-app purchases during a fifteen minute window after a password was initially entered. This allowed children to embark on virtual spending sprees without their parents’ consent. As noted by the FTC, the App Store’s password prompt screen did not make it clear to parents that the entry of the password would enable in-app purchases for up to fifteen minutes.

As a result, the FTC required Apple to make two major changes to the way it bills customers through the App Store. First, as noted by the FTC, “The settlement requires Apple to modify its billing practices to ensure that Apple obtains consumers’ express informed consent prior to billing them for in-app charges.” Second, even if a company gets a consumer’s permission for future charges, “consumers must have the option to withdraw their consent at any time.” According to the terms of the settlement, both of these changes must be implemented by March 31.

However, according to an unnamed insider source cited by ZDNet, Apple may be having some difficulty in meeting the approaching deadline. Per ZDNet’s source, it is taking Apple longer than expected to make the changes required by the FTC.

As noted by ZDNet, the changes will need to be implemented in the desktop version of iTunes as well as its iOS 7 mobile operating system. Although there are no in-app purchases through Apple’s desktops, the iTunes Store does feature the problematic fifteen minute no-password purchase window.

Apple released the fifth beta version of the iOS 7.1 update early last month and many industry watchers expected the iPhone maker to release the final version of the update late last month. ZDNet speculated that the iOS 7.1 update delay may be related to the required App Store changes.

The App Store changes that Apple is working on may alleviate concerns recently raised by European Union regulators. According to a recent press release from the European Commission, regulators are concerned with mobile games that are advertised as free, but can include expensive in-app purchases. One issue addressed by the commission was how some apps mislead consumers about the true costs involved. Another issue discussed by the commission was the clarification of payment arrangements, especially for automatic debits through default settings.

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