FTC Act Case Study

The FTC sued Amazon for millions of dollars that probably wound up on the family kindle fire bill. It was because of money they racked up while kids played their video games, but parents had no idea until they got their bills. The FTC regulators called that practice illegal. Parents complained and Amazon claimed they had refunded some of the charges, but the government decided it wasn’t enough and that Amazon violated the FTC Act because they caused substantial financial loss to consumers with something they couldn’t reasonably avoid (ftc.gov, Item 32, p. 10 (n.d.). Amazon sold these items without requiring a password so the charges were in the millions of dollars. Apple settled with the FTC for a similar issue in the sum of $32.5 million (ftc.gov, 2014). But Apple didn’t settle like Apple did and they claimed that their case was different because their facts were different than the Apple case (FoxNews, 2014). Amazon’s failure to see they were ‘continuing with a failed course of action’ in order to save face is a clear example of “Escalation of Commitment” (Phillips & Gully, 2014, p. 295).

There seems to be a pattern in behavior where these companies see the opportunity to make additional profit with Apps, but seldom accept responsibilities for their actions until the problem escalates. In both instances because they ignored the financial injury made to
Will Provide Full Consumer Refunds of At Least $32.5 Million to Settle FTC Complaint It Charged for Kids’ In-App Purchases Without Parental Consent. (2014, January 15). Retrieved October 28, 2015, from https://www.ftc.gov/news- events/press-releases/2014/01/apple-inc-will-provide-full-consumer-refunds- least-325-million
FTC V. Amazon.com, Inc. (2014). Retrieved October 28, 2015, from https://www.ftc.gov/system/files/documents/cases/140710amazoncmpt1.pdf

Phillips, J., and Gully, S. (2014). Organizational behavior: Tools for success (2nd ed.). Mason, OH: Cengage Learning. Kindle