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Federal Intrusion: Too Many Apps for That


Google made headlines this month when the tech giant agreed to pay $19 million to settle Federal Trade Commission charges that the company had made it too easy for children to make unauthorized purchases in the Android app store. That wasn’t all: The FTC effectively gave itself the right to oversee Google’s app-store design decisions for the next two decades. This is the latest in a series of legal settlements that threaten to hobble innovation in the fast-paced technology industry.

In 2011 the FTC began investigating Google’s “in-app purchases,” which are transactions a user makes on a smartphone while, say, playing a game. Children’s apps sometimes have in-app purchase options such as buying gold coins to reach the next level of a game. The FTC accused Google of not properly warning parents that children could run up a bill for such in-app purchases, although since 2012 Google has required a password to do so.

The agency claims the authority to second-guess product-design decisions under Section 5 of the 1914 Federal Trade Commission Act. The FTC may deem a product design “unfair” if it causes “substantial injury” to consumers that cannot reasonably be avoided. One caveat: The FTC by law must show that the consumer harm outweighs the design’s countervailing benefits.

When the FTC files a complaint, companies often settle out of court to avoid expensive legal hassle and prolonged public exposure. But under Section 5, the FTC has especially broad discretion to decide what practices are “unfair.” And because nearly all high-tech enforcement actions end in settlements, there is almost no case law to rein in the agency.

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