According to the FTC lawsuit, Amazon’s set up allowed children playing kids’ games to spend unlimited amounts of money to purchase items as they played, such as coins or stars and that kids may not have been able to distinguish which items cost actual money and which cost virtual currency
Thousands of consumers are due millions in refunds for unauthorized charges billed to their credit cards by Amazon.com for amounts racked up by their children playing apps, the Federal Trade Commission (FTC) alleged in a lawsuit filed last week.
The suit, filed in Washington federal court, charges that Amazon’s set up allowed children playing kids’ games to spend unlimited amounts of money to purchase items as they played, such as coins or stars, without parents’ permission and that kids may not have been able to distinguish which items cost actual money and which cost virtual currency. Amazon keeps 30 percent of all in-app charges –which can range from 99 cents to $99 — and has a no-refund policy on these types of charges.
‘Not a hack but nearly as bad’
One parent complained to the FTC that she was billed more than $300 in charges her daughter ran up. Another parent’s six-year old child pushed buttons at random and incurred charges on a gaming app.
The commission said Amazon knew within a month of introducing the in-app charge system in 2011 that it was causing problems for customers and that internal emails described the situation as “near house on fire.” In March 2012 Amazon began requiring passwords to confirm in-app charges but only those exceeding $20. Last year, Amazon adjusted its in-app charge system to require passwords but sometimes the passwords were stored and customers weren’t always presented with the prompt, and even if they were, the prompt did not provide the amount of the charge, the FTC alleged in its suit.
One Amazon customer service representative told a parent, according to the suit:
It’s not a hack, but nearly as bad: it’s an in-game purchase. A user, such as a child, can easily misinterpret the option to spend actual money as just part of the game.
Basic consumer rights
FTC Consumer Protection Director Jessica Rich said the suit against Amazon is part of a continued effort by the agency to enforce a crucial tenant of consumer rights, which is that consumers should not be billed for charges without informed consent.
In March the FTC settled a similar complaint with Apple for allegedly unfairly charging parents for in-app purchases made by their children without their consent. Apple agreed to refund customers $32.5 million and change its billing practices. Rich said Apple is in the process of complying with that settlement.
Last week, the FTC filed a complaint against T-Mobile alleging it bilked customers out of hundreds of millions of dollars in a cramming scheme.
Amazon defended itself in a July 1 letter to the FTC and called the lawsuit “deeply disappointing.” Amazon Associate General Counsel and Vice President Andrew DeVore said:
In-app purchasing was and remains a new and rapidly evolving segment, and we have consistently improved the customer experience in response to data….Pursuing litigation against a company whose practices were lawful from the outset and that already meet or exceed the requirements of the Apple consent order makes no sense, and is an unfortunate misallocation of the Commission’s resources.
While the FTC acknowledged that Amazon has refunded some customers who complained to the company, Rich said the commission is seeking full refunds for all affected consumers and a court order ensuring that Amazon will obtain permission before imposing charges for in-app purchases. It is also requesting Amazon give up the revenue it gained from these charges. The FTC, however, is not seeking penalties.
If the Nifty manages to close above 7,570, we may see it rising further
We had mentioned on Monday that if the benchmark manages to hold above the day's low, we may get a short rally next day. Breaking five days of negative moves, the Indian benchmark indices covered up more than half of the past two day’s losses on Tuesday and closed near the day’s high.
The S&P BSE Sensex opened at 25,101 while NSE's CNX Nifty opened at 7,491. Sensex hit a low of 25,020 while Nifty hit a low of 7,459. From the day’s low both the indices reached up to 25,254 and 7,535, respectively. Sensex closed at 25,229 (up 222 points or 0.89%) while Nifty closed at 7,527 (up 73 points or 0.97%). The NSE recorded a volume of 83.33 crore shares. India VIX fell 5.11% to close at 14.7675.
Except for Pharma (0.51%), IT (0.14%) and FMCG (0.14%) all the other indices closed in the green. The top five gainers were PSU Bank (4.04%), Nifty Midcap 50 (2.88%), Bank Nifty (2.78%), Midcap (2.27%) and CPSE (2.24%).
Of the 50 stocks on the Nifty, 39 ended in the green. The top five gainers were State Bank of India (4.34%), Bhel (4.23%), Bank of Baroda (4.00%), NMDC (3.54%) and DLF (3.53%). The top five losers were Dr Reddy (1.86%), Asian Paints (1.61%), Hero MotoCorp (1.49%), NTPC (1.42%) and TCS (1.04%).
Of the 1,595 companies on the NSE, 1,134 companies closed in the green, 410 companies closed in the red while 51 companies closed flat.
The data released by the government after trading hours on Monday showed the annual rate of inflation based on the combined consumer price indices (CPI) for urban and rural India eased to 7.31% in June 2014, from 8.28% in May 2014. The rate of inflation based on the combined consumer food price indices (CFPI) for urban and rural India eased to 7.97% in June 2014, from 9.56% in May 2014, the data showed. Core CPI inflation which excludes food and energy prices, eased to 7.39% in June 2014, from 7.71% in May 2014.
SBI (4.32%) was the top gainer in the Sensex 30 pack. State Bank of India has cut the interest rate on bulk and retail term deposits by up to 50 basis points on short-term deposits of less than one-year duration. In the case of retail deposits interest rate has been cut by 50 basis points to 7% (from 7.5%) on term deposit in the 7 to 179 days of maturity.
In the case of bulk deposits, SBI has cut the interest rate by 25 basis points each on term deposits in two maturity period — 7 to 60 days (to 6.25%) and 61 days to less than 1 year (to 6.75%). The new deposit rates are with effect from July 18.
NTPC had approached CERC with a request to reconsider the tariff regulations for 2014-19. This was rejected by the commission. NTPC will continue to pursue legal action against new tariff determination parameters. NTPC (1.46%) was among the top three losers in the Sensex 30 stock.
Financial Technologies was holding 26% in MCX as on June 2014. It sold 10,19,000 shares of the company on 8th July 2014. On the same day Rakesh Jhunjhunwala brought 10,00,000 shares in the company. Financial Technologies (10%) and MCX (8.81%) were among the top two gainers in the ‘A’ group on the BSE.
Piramal Enterprises traded ex-dividend on Tuesday. The company declared a dividend of Rs 52.50 per share for the year ending March 2014. Face value per share is Rs 2. Piramal Enterprises (9.78%) was the top loser in the ‘A’ group on the BSE.
US indices closed in the positive on Monday. Market awaits Federal Reserve Chair Janet Yellen's testimony before the congress due later in the day.
Except for NZSE 50 (0.24%) all the other trading Asian indices closed in the green. Jakarta Composite (0.99%) was the top gainer.
The Bank of Japan kept its record stimulus unchanged and forecasted that inflation will pick up to its 2% price target. The central bank stuck with its goal of an annual increase in the monetary base of between 60 trillion yen and 70 trillion yen ($690 billion), it said in a statement today, 15 July 2014 in Tokyo at the end of a two-day monetary policy review.
European indices were trading in the negative while US Futures were trading in the positive.
Mutual funds have sold as much as Rs4,500 crore of debt in two days leading to higher bond yields. Are mutual fund investors redeeming their debt mutual fund investments due to the new tax norms?
Last year, we saw bond yields rise as foreign investors started heavily selling Indian debt. This year after the budget announcement, mutual funds have sold as much as Rs4,500 crore of debt in two days. This has been the highest amount sold on two consecutive days since 31 July 2013. On 10 July 2014, the Union Budget 2014-15 announced, higher long-term capital gain (LTCG) tax for non-equity mutual funds. On the day of the budget mutual funds sold Rs1,183.50 crore of debt and on the next day as much as Rs3,351.30 crore of debt securities were sold, according to data released by the Securities and Exchange Board of India. Foreign investors on the other hand were net buyers of around Rs988.24 crore of Indian debt over the same period. The benchmark 10-year government bond yield rose by four basis points to 8.77% on 11 July 2014 from 8.73% on 9 July 2014. Was this due to heavy redemptions from debt mutual funds on account of the LTCG tax amendments?
Finance minister Arun Jaitley, in his maiden budget, announced that tax on debt mutual funds will be increased to 20% (from 10% earlier), as well as the holding period for classification as long term would be extended to 36 months from the earlier 12 months. This was an attempt to bring parity between different instruments.
Reports mention that the tax impact could result in huge outflows from debt mutual funds. The Association of Mutual Funds in India has written to the regulator and the finance ministry to ensure that none of the tax proposals are brought in force with retrospective effect which could lead to heavy redemptions. The FM has yesterday announced that he may consider imposing this next year instead of this year itself.
Commenting on the impact of this regulation, Mr Balasubramanian, CEO, Birla Sun Life Mutual Fund said, “I would assume that FMPs as an asset class would lose attraction for short term and will come largely on the longer term. So, anyone with money for this category would need to come in for three years.” Further, he mentioned that, “The increase in long-term capital gain tax for debt funds would encourage investors to come in longer term saving.”
Much of the mutual fund redemptions could be from corporate investors. Murthy Nagarajan, head- fixed income, Quantum AMC, mention that, “These norms are aimed at the corporate investors who used to invest for one year and avail of tax benefits by investing in a fixed maturity plan. The same corporate investors if they invest in bank deposits will pay at the highest marginal tax rates. The retail investors participation has been nominal in one year FMP’s. The idea is to pluck this tax arbitrage for corporates. Going forward, the FMP money maturity may be invested in liquid funds or in bank fixed deposits.”
Another issue with this regulation is its applicability. There has been no clear instruction on when would this tax norm be effective and would investors have to pay long term capital gains tax of 20% if they have redeemed their investment during the period between April 1, when the revised rate is proposed to take effect, and July 10, the date of its announcement. A clarification is said to be issued.
Similarly, the budget highlights mentions a line about ‘Uniform tax treatment for pension fund and mutual fund linked retirement plans’, however, the budget speech, and neither the finance bill mentions anything about taxation for mutual fund linked retirement plans.
Again the applicability of Section 80 CCD for private sector employees investing in a pension fund has been a much discussed issue. Industry experts have different views of the same. Some are saying the section was reworded to bring clarity and thus would have no implication for private sector employees who have claimed deduction under this section. Others have the view that, private sector employees, employed on or before 1 January 2004 would have wrongly claimed a tax deduction under this section.