Apple Settles Kids In-app Purchase Lawsuit

Apple has agreed to a settlement in a lawsuit where parents said the iPhone and iPad maker did too little to ensure that children wouldn't make in-app purchases without permission. As part of the settlement, Apple is offering parents a US$5 iTunes gift card if their children made in-app purchases that weren't authorized.

Apple reaches settlement in iTunes in-app purchase lawsuitIf minors spent more than $5 on in-app purchases, Apple will give parents a credit for the amount, and if the purchases topped $30, parents can request a cash refund.

The class action lawsuit was filed in April 2011 and alleged that Apple was running a "bait-and-switch business scheme" were iOS apps could be downloaded for free and then rack up big sales with in-app purchases. The case was started by Garen Meguerian after his child spent $200 in apps without his knowledge.

The issue -- beyond Mr. Meguerian's supervisory style -- was that the password used to make in-app purchases was the same as a user's App Store account password, any child that had access to that one password could buy add-ons when they were playing games and parents wouldn't know.

The lawsuit stated,

These games are highly addictive, designed deliberately so, and tend to compel children playing them to purchase large quantities of Game Currency, amounting to as much as $100 per purchase or more.

Apple's iOS 4.3 update, released in March 2011, added new restrictions that made it more difficult for kids to make in-app purchases without their parent's permission, and now also lets parents set monthly limits on how much can be spent on those purchases. Previously, Apple allowed for a 15 minute window where iTunes account passwords weren't needed to make more purchases after an app had been paid for, which opened the door for unsupervised kids to potentially buy content in games.

Parents hoping to reclaim a little cash from Apple will have to show that their under age children bought game currency without permission, and that they didn't provide the password needed to make the purchases.

The settlement is awaiting court approval, and assuming Apple gets the green light to move forward could start issuing gift cards and payments in late 2013 or early 2014.

[Thanks to GigaOM for the heads up]