Federal regulatory agencies routinely act as table-setters for the plaintiffs’ bar. Class-action lawsuits can require targets of federal enforcement actions, even after those actions end in settlement, to defend against the same allegations in court. A federal judge’s April 3, 2015 dismissal of a class action on the ground that the company had already entered into a settlement with the Federal Trade Commission (FTC), therefore, was a commendable outcome. The underlying FTC action that inspired the suit, however—an industry-wide investigation into companies’ in-app purchase procedures—is far less welcome. The Commission’s investigation is yet another example of government’s steady drift away from respecting permissionless innovation and toward “mother-may-I” paternalism.
FTC’s In-App Purchase Inquest. FTC initiated an investigation in 2011 of various companies’ mobile-app sales practices. The Commission had received complaints from parents that their children were making “unauthorized” purchases on mobile app stores. On January 15, 2014, Apple agreed to settle with FTC over charges that its in-app purchase process constituted an unfair business practice under § 5 of the FTC Act. On September 4, 2014, Google entered into a similar settlement. Both app sellers agreed to provide customers with refunds and alter their app sales practices.
In addition to Google and Apple, FTC also accused Amazon of unfair business practices for failing to prevent “unauthorized” in-app purchases. Amazon, however, refused to settle the charges. The Commission filed suit on July 10, 2014 in the U.S. District Court for the Western District of Washington. On December 1, 2014, Judge John C. Coughenour denied Amazon’s motion to dismiss. Continue reading