Bloomberg News

Apple Seeks Approval of Child App-Purchase Settlement

March 02, 2013

Apple Inc. (AAPL:US) asked a federal judge to approve a settlement resolving claims that the company induced children to make game-related purchases on iPhones and iPads without their parents’ knowledge or permission.

The agreement concerns “In-App Purchases,” for what the complaint in the case describes as virtual supplies, ammunition, fruits and vegetables, cash and other so-called currency used to play games on mobile devices.

Lawyers representing Apple appeared before U.S. District Judge Edward J. Davila in San Jose, California, yesterday to seek preliminary approval of the agreement, which would require Apple to send notice of its terms to more than 23 million iTunes account holders, according to a court filing. That notice will also provide instructions for parental controls that can disable the purchases.

Davila congratulated the lawyers for arriving at a settlement early in the litigation, and said he will consider refinements to the agreement that the lawyers agreed to submit to him March 4.

“I think this subtly suggests to you where I’m going with this,” Davila said.

Class Credit

Under the agreement, class members may choose a $5 credit for Cupertino, California-based Apple’s iTunes store. Alternatively, they can get an iTunes store credit -- or a cash refund for those who don’t have an iTunes account -- totaling all of their minor child’s purchases within a 45-day period. Class members claiming they were charged $30 or more without their consent can choose a cash refund instead of the iTunes credits, according to court filings.

Addressing Davila’s concerns, Ashlie Beringer, a lawyer representing Apple, said the company will mail the notice for those who can’t be reached by e-mail, and that Apple will also offer a version of the notice online in Spanish.

The plaintiffs’ motion for approval of the agreement is unopposed, according to the filings.

The games that triggered the litigation 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,” according to the complaint in the case. The original complaint was filed in 2011.

‘Extensive Negotiations’

The settlement was arrived at after “extensive negotiations” with mediators Daniel Weinstein and Catherine Yanni, according to a filing. Apple will pay attorneys’ fees of $1.3 million, according to the agreement.

Apple spokesman Tom Neumayr and Simon Paris, a lawyer representing the class members, declined to comment on the hearing.

The case is In re Apple In-App Purchase Litigation, 11- cv-01758, U.S. District Court, Northern District of California (San Jose).

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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