This Painful Lesson Could Boost Amazon’s Reputation



Unauthorized charges

Amazon (AMZN) tried and failed to escape a responsibility that required it to refund customers who’d incurred unauthorized charges on its platform.

The FTC (Federal Trade Commission) found fault with the default parental settings on Amazon’s Kindle Fire operating system. The device launched with the parental settings turned off, according to technology news website Engadget.

The regulator reasoned that turning off parental settings in the Kindle Fire made it too easy for kids to accidentally incur expenses on behalf of their parents. A child using Kindle Fire could spend up to $100 without being prompted to enter a password, according to the FTC.

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A $70 million refund

As a result of the parental settings’ being turned off by default in the Kindle Fire, many parents incurred unnecessary expenses. The FTC ruled that Amazon must refund customers for any costs incurred in this manner. Amazon said that it had done its part in addressing the complaints and had even refunded customers where appropriate. However, after a court battle lasting nearly three years, Amazon agreed in May 2017 to release $70.0 million in refunds to the affected customers.

Amazon isn’t alone in dealing with this problem. Apple (AAPL) and Alphabet’s (GOOGL) Google have gone through the same thing, making settlements of between $19.0 million and $32.5 million with the FTC.

Opportunity to win the hearts of shoppers

Parting with $70.0 million will certainly drill a hole in Amazon’s finances, but it’s worthwhile. The settlement provides Amazon with an opportunity to show that it cares about its customers. If its gestures are received well by shoppers, it could just win itself more loyal customers to bolster its competition against the likes of Walmart (WMT) and Target (TGT).


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