Apple was charged with letting kids spend millions on in-app purchases without their parents’ consent. The company grudgingly agreed to settle.
The FTC’s press release described the consent decree as a huge win for aggrieved parents.
Now the fun begins.
First, there’s Tim Cook’s memo to the staff, which several blogs obtained and which Fortune can confirm is genuine. In it Cook points out that the case in which Ramirez just declared victory had already been adjudicated before the FTC took it up.
A federal judge had signed off on this settlement and Apple had begun mailing out reimbursement checks when the FTC, under newly-appointed Chairwoman Ramirez, decided to get involved.
To Cook this “smacked of double jeopardy” but he says he decided to sign rather than fight because, as he put it, “the consent decree the FTC proposed does not require us to do anything we weren’t already going to do.”
Not quite. There’s still a little matter of $32.5 million. But we’ll get to that later.
Meanwhile, the commissioners have issued a flurry of statements, mostly responding to a pointed dissent filed by commissioner Joshua Wright, a former George Mason professor of law. In it, Wright takes issue with the premise of the case, arguing that the FTC had never before charged a company with “unfair acts or practices” for this kind of marketing behavior.
Furthermore, he writes, rather than a substantial victory, “this is a case involving a miniscule percentage of consumers – the parents of children who made purchases ostensibly without their authorization or knowledge… The injury in this case is limited to an extremely small – and arguably, diminishing – subset of consumers.”
Which brings us to that $32.5 million. It’s not clear from any of the documents how this figure was arrived at, nor whether the refunds Apple has already paid will be subtracted from it. By the terms of the consent agreement, Apple must pay out “a minimum” of $32.5 million — or roughly $880 for each of Apple’s complainants.
Any money that’s not spent — which could, in theory, be millions of dollars — goes to … wait for it … the commission.
So, bottom line, the FTC has hit an Apple trifecta: 1) headlines that paint the government as protectors of parents and children in the digital age, 2) a story in which the FTC gets to play the giant killer, and 3) a novel way to extract millions out of Apple’s coffers — and maybe send some of it directly to the FTC’s.
Fun fact: Before she was appointed to the FTC, Chairwoman Ramirez was a partner in the Los Angeles office of Quinn Emanuel Urquhart & Sullivan.