Apple settled a class-action lawsuit last year over unauthorized purchases within apps - transactions that could be made within 15 minutes of buying an app from Apple without having to provide an additional password or authorization. As part of the settlement, Apple offered refunds to consumers who were affected, and the company said in an email to employees Wednesday that it had received 37,000 claims.
But the FTC said that similar activity continued long after the class-action settlement. In a consent decree that now must be approved by a federal court, Apple agreed to modify its practices.
"We allege that Apple has been aware of the issue since at least March of 2011," said Edith Ramirez, the FTC chairwoman. "In our view, the problem continues and it needs to be rectified."
Apple faces a March 31 deadline to notify consumers about the refunds and to make other changes.
At one time, after a user bought an app, there was a 15-minute window to freely buy add-on content for the app, without having to enter a password. This meant that 15 minutes after parents bought an app, children could easily buy any kind of in-app goods.
With a software update to its mobile devices in 2011, Apple began requiring users to re-enter passwords after opening the app, even if the app was opened within 15 minutes of a purchase. At that point, users have another 15 minutes to buy in-app items before they are prompted to enter their password again. There are also controls in iOS, Apple's mobile operating system, that give parents more finely tuned controls over in-app purchases and the ability to shut them off completely.
The FTC said Wednesday that Apple needed to be more clear to consumers that they are buying an app in which other purchases could be made within 15 minutes. The agency also said Apple must give consumers a choice when they buy about whether to accept the 15-minute window for in-app purchases. They must be able to withdraw their approval if they change their mind.
Steve Dowling, an Apple spokesman, said the company intended to comply with the FTC.
"Protecting children has been a top priority for the App Store from the very beginning, and Apple is proud to have set the gold standard for online stores by making the App Store a safe place for customers of all ages," Dowling said. "Today's agreement with the FTC extends our existing refund program for in-app purchases, which may have been made without a parent's permission."
Apple's App Store for iPhones and iPads became successful largely because it made the process of buying software as simple as the tap of a button. Customers spent $10 billion last year in the App Store.
In April 2011, a group of parents filed the class-action lawsuit, concerning what they called "bait apps" - apps that were free to download but included their own ministores to buy goods. Apple and the plaintiffs in the lawsuit agreed to a settlement last year.
The business strategy for so-called bait apps is called freemium, as in free meets premium. In mobile app stores, freemium apps now generate more revenue than apps that charge for money upfront, according to Flurry, an app analytics company.
The consent decree requires Apple to follow through with the promised refunds and modify its systems to make sure that children cannot make unapproved purchases within apps. Apple must pay at least $32.5 million; if the refunds total less, the remainder goes to the FTC, but there is no upper limit on the amount of refunds for which Apple is liable.
According to the FTC, one consumer reported that her daughter had spent $2,600 in the app Tap Pet Hotel, and other consumers reported unauthorized purchases by children totaling more than $500 in the apps Dragon Story and Tiny Zoo Friends.
In an email to Apple employees Wednesday, Timothy D. Cook, the company's chief executive, said that he did not see a reason for the government to go after Apple after it had already agreed to settle the issue with consumers.
Ramirez said the FTC believes its settlement is "more robust" and more thorough, in that it requires Apple to modify its conduct.
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