Apple to Settle Class-Action Lawsuit Over Rogue App Purchases By Kids

Apple Inc. has reportedly agreed to settle a class-action lawsuit over applications (apps) purchased through its online marketplace. Five parents sued the company after their children inadvertently made purchases in apps that purported to be free.

According to the plaintiffs’ complaint, “Apple failed to adequately disclose that third-party Game Apps, largely available for free and rated as containing content suitable for children, contained the ability to make In-App Purchases.”

Apple requires users to authenticate their accounts by entering a password prior to purchasing and/or downloading an app or buying game currency. However, up until early 2011, once the password was entered once, Apple permitted users to buy game currency for up to fifteen minutes without re-entering the password. As a result, the plaintiffs’ children racked up bills ranging from $99.99 to $338.72 at a time.

The case posed an interesting contract issue. As detailed in court documents, the plaintiffs maintained that each in-app purchase constituted a separate and voidable contract between Apple and their minor children, which could be subsequently disaffirmed by a parent or guardian on behalf of the minors. Under their theory, “a contract between Apple and minor existed each time that (1) Apple offered to sell game currency to a minor playing an app, (2) the minor accepted Apple’s offer, and (3) the transaction was supported by consideration, or payment made by the Plaintiffs.”

Meanwhile, Apple argued that the relevant contractual relationship governing the in-app purchases existed solely between Apple and plaintiffs. Citing the original Terms & Conditions signed by the plaintiffs, it contended that the purchases were not voidable. Moreover, Apple argued that the Terms & Condition specifically hold the account holder liable for any unauthorized purchases.

Since the case was settled, we will never know how the court would have ruled on these issues. Under the terms of the settlement, Apple will provide a $5 iTunes store credit to impacted customers, which could reach 23 million. In addition, class members claiming $30 or more from Apple may elect to receive a cash refund. Overall, the settlement is expected to cost Apple $100 million.

If you have any questions about this case or would like to the legal issues involved, please contact me, Christine Vanek, or the Scarinci Hollenbeck attorney with whom you work.