Children play with iPads in the Apple Store.

Dangerous game: Children play with iPads in the Apple Store. Photo: Glenn Hunt

Following tens of thousands of consumer complaints, Apple has agreed to refund at least $US32.5 million ($36.5 million) to US customers for children's purchases from its App Store without parental consent, regulators say.

You cannot charge consumers for purchases they did not authorise. 

Edith Ramirez, FTC chairwoman

Apple must also change its billing practices to make it more obvious that an actual purchase is taking place during the course of a game or app, the US Federal Trade Commission (FTC) said.

"You cannot charge consumers for purchases they did not authorise": FTC chairwoman Edith Ramirez.

"Children ran up millions of dollars": FTC chairwoman Edith Ramirez. Photo: AFP

The mass Apple refund will not affect Australian parents, but follows a local crackdown and awareness campaign by Australia's competition watchdog on potentially misleading "free" games and apps that trick children into spending their parents' money on in-game purchases.

In December, the Australian Competition and Consumer Commission (ACCC) found hundreds of "free" smartphone games targeted at children failed to warn parents about potentially costly in-game purchases.

It is now considering legal action and is engaging with the industry about ensuring adequate disclosures about costs associated with app-based games.

"It smacked of double jeopardy": Apple CEO Tim Cook.

"It smacked of double jeopardy": Apple CEO Tim Cook. Photo: Reuters

In its crackdown, it discovered many of the apps available for free through the Apple and Android app stores did not reveal players would have to buy upgrades or virtual rewards. Up to 75 per cent of free games on one of the platforms did not reveal in-game purchases could be made.

The watchdog welcomed the outcome in the US, saying it strengthened "the growing global consensus on the need to address concerns about in-app purchases".

"The issue of in-app purchases, particularly in games used by children, is an area of concern for the ACCC."

But just how could a kid buy these things without mum or dad's knowledge and run up bills into the hundreds of dollars or more?

A game-player wants to advance to a new level or buy coins, a chest of gems or treats for a virtual pet. It takes a click, and then the app asks for a password, and a parent punches it in.

According to the FTC complaint, Apple did not make it clear that they were buying something. Parents also were not told that entering the password started a 15-minute clock during which kids could make unlimited purchases without any further action by an adult, the agency said.

A single purchase generally can range from 99 cents to $99, the commission said.

One parent told the FTC her daughter had spent $US2600 in Tap Pet Hotel, in which kids can build their own pet lodging. The game is free to download and play, but it takes in-app purchases for treats and coins for the pets.

Others consumers reported unauthorised purchases by children totalling more than $US500 in the apps Dragon Story and Tiny Zoo Friends.

"You cannot charge consumers for purchases they did not authorise," said commission chairwoman Edith Ramirez. "Children ran up millions of dollars in charges without their parents' knowledge and consent."

Consumers "will be obtaining full redress" for any unauthorised charges, she added.

Apple will have until March 31 to come up with a billing system that ensures the company obtains consumers' informed consent before billing them for in-app purchases.

The settlement involves all apps in which minors made unauthorised purchases.

It addresses the same issue raised in a class-action lawsuit that Apple resolved last year. In that case, Apple agreed to contact 28 million of its app customers to offer them a $US5 store credit or a $US30 cash refund if their children had spent at least that much money without parental consent. The deadline for filing a claim was Monday.

That settlement resulted in about 37,000 claims, according to a memo Apple chief executive Tim Cook sent to company employees on Wednesday to discuss the FTC's rebuke.

"It doesn't feel right for the FTC to sue over a case that had already been settled," Cook wrote. "To us, it smacked of double jeopardy."

Cook said the company relented to the FTC because the consent decree "does not require us to do anything we weren't already going to do, so we decided to accept it rather than take on a long and distracting legal fight".

Apple has taken a series of steps in the past few years to ensure its app store is a "safe place for customers of all ages".

The app store is gold mine for software developers and the company, which charges a 30 per cent commission on the transactions. Apple says its customers spent more than $US10 billion on app transactions last year. That figure includes the price charged by some apps for the software, as well as revenue from purchases while playing a game or for some other extra service.

In the FTC case, the $US32.5 million payout is a minimum. As part of the settlement, Apple must pay full refunds to consumers for kids' unauthorised purchases, so that figure could climb. If it doesn't rise to $US32.5 million, the difference would be paid to the FTC, Ramirez said.

AP with Lucy Battersby and Ben Grubb