Amazon enters into the trouble zone with FTC over in-app purchases made by children. FTC has imposed a heavy penalty and Seattle based retailer is not in a mood of paying it.

Currently, Amazon are fighting US regulators who are demanding the company pay a penalty over purchases made by children on smartphones. As it stands right now, US regulators are trying to force Amazon to pay fees on unauthorized purchases made by children that were potentially unknown to the card holders affected.

According to sources, the popular online retailer are facing lawsuits filed by the Federal Trade Commission (FTC). The dispute is very similar to a settlement reached between the FTC and Apple earlier this year. The dispute is centered around the controversy of deliberately misleading in-app purchases. This issue is very common in apps found on Android and iOS devices.

Apps are advertised as free and as such are downloaded. After the initial install, users are frequently prompted to purchase additional services through credit cards registered on the device. As they are registered in a smartphone, a child can very easily be persuaded into using their parent’s credit card details. Children are seen as more susceptible to being drawn in by this business practice, which is why the dispute has been brought to the forefront.

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The FTC have stated that thousands of complaints have been brought to them in regards to in-app purchases through Kindle devices, which are from Amazon. Amazon did recently change their in-app charging policies last month, though the dispute is still moving forward.

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The FTC are pushing Amazon to refund customers and compensate for FTC costs. Needless to say, Amazon are fighting back against the FTC on this issue. The ruling could have very negative effects on revenue. In the Apple case earlier this year, the company was forced to refund at least $32.5 million dollars to customers affected by in-app purchases, regardless of whether or not Apple were specifically involved with the applications.

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The FTC are very clearly on the side of parents affected by this business model. The FTC stated in their draft that parents face “significant hurdles” to receive a refund. Amazon have stated that they do in fact refund customers who said their children were responsible for these in app purchases. The company also stated that a warning about this problem is very clearly presented in real time before every in-app purchase.

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