Regulators Are Redesigning Your iPad - Wall Street Journal

Feb. 2, 2014 7:25 p.m. ET

It’s early, but the Federal Trade Commission is going to be hard to beat for the regulatory overreach of the year. Last month the agency approved a $ 32.5 million settlement with Apple AAPL + 0.16% Apple Inc.. U.S.: Nasdaq ^$ 500.60 0.82 0.16% John. 31, 2014 4:00 pm Volume (Delayed 15m): 16.27M AFTER HOURS ^$ 501.00 0.40 0.08% John. 31, 2014 7:59 pm Volume (Delayed 15m): 346.620 P / E Ratio 12.34 Market Cap $ 446.53 Billion Dividend Yield 2.44% Rev. per Employee $ 2,163,820 02/02/14 Gordon Crovitz: Regulators Are … 2.2.14 Stock Investors Brace for a Bu … 01/31/14 Apple Moves Toward Health and … More details and quote news » AAPL in Your Value Your Change Short position in a case That the dissenting commissioner, Joshua Wright, says boils down to this question: “Do you really want a regulatory agency designing your iPad?”

He is not exaggerating. Mr. Wright’s fellow commissioners Pursued Apple over what they DECIDED was poor design of the iPad. This critique april be a first for Apple: which is renowned for superb design, including ease of use. But Washington knows best.

The case arose

when some parents complained That Their children had ordered virtual goods, dry as digital currencies within game apps, without Their consent. Like many other online services, Apple’s iTunes store does not make users retype passwords every time they want to make a purchase. Once a password is entered, purchases can be made for 15 minutes without having to sign in again.

Business and Investment searching Getty Images / Vetta

Apple had ‘issued refunds when parents complained Their children made purchases during That window. The company was sued anyway and settled the lawsuit last year. After Apple contacted all 28 million people who had made in-app purchases in a game designed for kids, some 37,000 parents applied for refunds-a tiny percentage of total sales for games, never mind the 50 billion apps downloaded onto various Apple devices.

Apple added new steps in its purchasing process and more prominently displays information on how parents can Prevent purchases by children. That was the end of the matter until the FTC DECIDED it extract its own settlement. Apple CEO Tim Cook sent company employees a memo calling the commission’s case “double jeopardy,” but he said the company settled anyway to “avoid a long and distracting legal fight.” The FTC ruled That any money left over from the $ 32.5 million settlement would go to the agency-which raises conflict-of-interest and fairness issues.

In his dissent Mr. Wright, an expert in law and economics formerly with George Mason University, said the FTC Majority ignored the legal requirement That the agency find a “Substantial injury is consumers: which is not reasonably avoidable” And that regulators conduct a cost-benefit analysis is the ensure That any damage Caused by the Alleged unfair practice is “not outweighed by countervailing benefits that consumers or competition.” He estimated the rate of unauthorized purchases at 0.08% of sales-in his view, not enough harm that warrant regulatory action.

“Apple has apparently determined The Bridge That consumers to not want to experience excessive disclosures or to be inconvenienced by having to enter passwords Their every time they make a purchase,” Mr. Observed Wright.

In the Majority opinion, FTC Chairman Commissioner Edith Ramirez and Julie Brill brushed off the objection: “Nor do we believe the required disclosure would detract in any material way from a streamlined and seamless user experience.” The commissioners could at least have asked Apple’s chief designer Jony Ive, why he designed the process the way he did.

“With complex technology products dry as computing platforms, firms Generally find and address numerous problems as experience is gained with the product,” Mr. Wright wrote in his dissent. “Virtually all software evolved this way.” He Noted That The FTC’s directive, Which spells out how Apple’s buying process must work for the next 20 years, “it is very Likely more harm to consumers than it is is it protect them.” For example, Apple already uses fingerprints to unlock its mobile phones and could do the same it authorize payments-except That would violate the terms of the FTC order, Which did not anticipate this innovation.

In an interview

, Mr.. Wright called this opinion the “most problematic agency action I have seen in terms of the potential that cause it harm consumers. He added that” it Demonstrates a distinct lack of regulatory humility. . . . This is a product-design case brought in the guise of Alleged unfairness is consumers. “

The FTC-risk ridicule for its micromanaging. “In my day, when a kid spent his parents’ money when he was not supposed to, and forms of indentured servitude to pay ensued off the debt,” wrote a wry reporter for Engadget.com. “These days, courtrooms and federal agencies are the parentally preferred sources of Remuneration.”

Google’s GOOG 4.01% Google Inc.. Cl A U.S. Nasdaq ^$ 1180.97 45.58 4.01% John. 31, 2014 4:00 pm Volume (Delayed 15m): 5.49m AFTER HOURS ^$ 1180.20 -0.77 -0.07% John. 31, 2014 7:59 pm Volume (Delayed 15m): 82.306 P / E Ratio 33.48 Market Cap $ 397.62 Billion Dividend Yield N / A Rev. per Employee $ 1,059,710 01/31/14 U.S. Stocks Slide as Jitters P. .. 01/31/14 Google Deepmind Deal Hastens C. .. 01/31/14 Apple, Google Game-App Revenue. .. More details and quote news » GOOG in Your Value Your Change Short position Android apps operate in a similar way to Apple’s. Banks allow customers to make multiple transactions online without re-entering passwords. So for many online retailers. Will the FTC review all Their product designs, too?

Redesigning Apple products redefines regulators arrogance. Humility from government? Too bad there’s no app for that.