Apple agrees to $100M settlement over kids' in-app purchases

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Apple (NASDAQ:AAPL) has agreed to pay out more than $100 million to settle a class action lawsuit filed by parents whose children purchased virtual goods and enhancements sold inside iPhone and iPad applications without permission. 

Under the proposed settlement, Apple will provide a $5 iTunes store credit to as many as 23 million U.S. consumers whose children purchased virtual weapons and goods marketed within iOS apps and games. Parents whose kids spent $30 or more also will be entitled to receive a cash payment instead of iTunes credit. To qualify, Apple customers must prove they were billed for in-app purchases made by a minor, had not given their iTunes account password to the child and have not already received a refund for the charges. The final settlement figure may vary.

U.S. District Court Judge Edward J. Davila of San Jose, Calif. will review Apple's proposal on March 1. Apple did not respond to requests for comment.

The class action suit, filed in 2011 on behalf of Philadelphia-based plaintiff Garen Meguerian and "other parents and guardians who permitted their minor children to download a free application and then incurred charges for game-related voidable purchases that the minor was induced by Apple to make," contends that iOS games like Bakery Story, Tap Zoo and Sundae Maker generated millions of dollars by selling "Game Currency" to children. Calling the freemium model "unlawful exploitation in the extreme," the suit states "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." 

Caroline Knorr, parenting editor at nonprofit Common Sense Media, told The San Jose Mercury News that "A lot of parents feel, 'I don't know anything about technology.' That's how they got sucker-punched with the in-app purchases… I think that companies like Apple have a responsibility to make sure parents have the tools they need to ensure their kids have a safe and responsible online experience."

For more:
- read this San Jose Mercury News article
- read this PCMag.com article

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