CRIMINAL CAPITALI$M
Epic Forced to Pay Record-Breaking $520 Million Fine for Violating Children's Privacy and Engaging in Dark Pattern Deception
Mack DeGeurin
Mon, December 19, 2022
Photo: Christian Petersen (Getty Images)
Fortnite-maker Epic Games has agreed to pay a massive $520 million fine in settlements with the Federal Trade Commission for allegedly illegally gathering data from children and deploying dark patterns techniques to manipulate users into making unwanted in-game purchases. The fines mark a major regulatory win for the Biden administration’s progressive-minded FTC, who, up until now, had largely failed to deliver on its promise of more robust reinforcement of U.S. tech companies.
The first $275 million fine will settle allegations Epic collected personal information from children under the age of 13 without their parent’s consent when they played the hugely popular battle royale game. The FTC claims that unjustified data collection violates the Children’s Online Privacy Protection Act. Internal Epic surveys and the licensing of Fortnite branded toys, the FTC alleges, show Epic clearly knew at least some of its player base was underage. Worse still, the agency claims Epic forced parents to wade through cumbersome barriers when they requested to have their children’s data deleted.
The FTC additionally took shots at Epic’s default privacy settings, which turn live voice and text communication on by default. That default settling allegedly led to children being linked up with teens and strangers online, who, in some cases then exposed the underage users to bullying, harassment and, “psychologically traumatizing issues,” including suicide. Employees at Epic allegedly expressed concern over harms stemming from that default privacy setting dating back to at least 2017. Despite those concerns, Epic still refused calls to make voice and text communication opt-in.
“No developer creates a game with the intention of ending up here,” Epic said in a statement acknowledging the fines. “The video game industry is a place of fast-moving innovation, where player expectations are high and new ideas are paramount. Statutes written decades ago don’t specify how gaming ecosystems should operate.”
“We accepted this agreement because we want Epic to be at the forefront of consumer protection and provide the best experience for our players.”
Though bad enough on its own, the child privacy violations were only part of Epic’s problem. The game-maker additionally agreed to pay $245 million to refund customers who the FTC says fell victim to manipulative, unfair billing practices that fall under the category, “dark patterns.” Fortnite allegedly deployed a, “counterintuitive, inconsistent, and confusing button configuration,” that led players to incur unwanted charges with a single press of a button. In some cases, the FTC claims that single press button meant users were charged while sitting in a loading screen or while trying to wake the game from sleep mode. Users, the complaint alleges, collectively lost hundreds of millions of dollars to those shady practices. Epic allegedly “ignored more than one million user complaints,” suggesting a high number of users were being wrongly charged. Now that $245 million payout from Epic will be used to refund customers who lost money.
“All game developers should rethink steps they’ve taken to simplify payment flows in favor of practices that provide the largest amount of clarity to players when they make purchase decisions,” Epic said in response to the dark patterns fine. “Saving payment information by default is a common way to streamline the checkout process, so players do not have to re-enter their payment method every time they make a purchase. We’ve agreed with the FTC to change this practice, and we now offer an explicit yes or no choice to save payment information.”
In a statement, FTC chair Lina Khan said she wanted the fines, some of the largest in the agency’s 108 year history, to make clear the agency’s intent to vigorously pursue violations.
“Protecting the public, and especially children, from online privacy invasions and dark patterns is a top priority for the Commission, and these enforcement actions,” Khan said.
And though the FTC’s latest fine is far cry from the $5 billion penalty the agency issued against Facebook in 2019 and represents just a portion of the billions Fortnite reportedly rakes in each year, supporters said it nonetheless represents more than a mere slap on the wrist.
“This agreement is not a parking ticket—it’s a clear demonstration of the FTC’s full-throated commitment to protecting children online and ending the use of dark patterns,” American Economic Liberties Project Executive Director Sarah Miller said in a statement. “By securing both the largest fine and refund in the Commission’s history, the agency is showing once again that laws are not suggestions—especially when kids’ well-being is on the line.”
Mack DeGeurin
Mon, December 19, 2022
Photo: Christian Petersen (Getty Images)
Fortnite-maker Epic Games has agreed to pay a massive $520 million fine in settlements with the Federal Trade Commission for allegedly illegally gathering data from children and deploying dark patterns techniques to manipulate users into making unwanted in-game purchases. The fines mark a major regulatory win for the Biden administration’s progressive-minded FTC, who, up until now, had largely failed to deliver on its promise of more robust reinforcement of U.S. tech companies.
The first $275 million fine will settle allegations Epic collected personal information from children under the age of 13 without their parent’s consent when they played the hugely popular battle royale game. The FTC claims that unjustified data collection violates the Children’s Online Privacy Protection Act. Internal Epic surveys and the licensing of Fortnite branded toys, the FTC alleges, show Epic clearly knew at least some of its player base was underage. Worse still, the agency claims Epic forced parents to wade through cumbersome barriers when they requested to have their children’s data deleted.
The FTC additionally took shots at Epic’s default privacy settings, which turn live voice and text communication on by default. That default settling allegedly led to children being linked up with teens and strangers online, who, in some cases then exposed the underage users to bullying, harassment and, “psychologically traumatizing issues,” including suicide. Employees at Epic allegedly expressed concern over harms stemming from that default privacy setting dating back to at least 2017. Despite those concerns, Epic still refused calls to make voice and text communication opt-in.
“No developer creates a game with the intention of ending up here,” Epic said in a statement acknowledging the fines. “The video game industry is a place of fast-moving innovation, where player expectations are high and new ideas are paramount. Statutes written decades ago don’t specify how gaming ecosystems should operate.”
“We accepted this agreement because we want Epic to be at the forefront of consumer protection and provide the best experience for our players.”
Though bad enough on its own, the child privacy violations were only part of Epic’s problem. The game-maker additionally agreed to pay $245 million to refund customers who the FTC says fell victim to manipulative, unfair billing practices that fall under the category, “dark patterns.” Fortnite allegedly deployed a, “counterintuitive, inconsistent, and confusing button configuration,” that led players to incur unwanted charges with a single press of a button. In some cases, the FTC claims that single press button meant users were charged while sitting in a loading screen or while trying to wake the game from sleep mode. Users, the complaint alleges, collectively lost hundreds of millions of dollars to those shady practices. Epic allegedly “ignored more than one million user complaints,” suggesting a high number of users were being wrongly charged. Now that $245 million payout from Epic will be used to refund customers who lost money.
“All game developers should rethink steps they’ve taken to simplify payment flows in favor of practices that provide the largest amount of clarity to players when they make purchase decisions,” Epic said in response to the dark patterns fine. “Saving payment information by default is a common way to streamline the checkout process, so players do not have to re-enter their payment method every time they make a purchase. We’ve agreed with the FTC to change this practice, and we now offer an explicit yes or no choice to save payment information.”
In a statement, FTC chair Lina Khan said she wanted the fines, some of the largest in the agency’s 108 year history, to make clear the agency’s intent to vigorously pursue violations.
“Protecting the public, and especially children, from online privacy invasions and dark patterns is a top priority for the Commission, and these enforcement actions,” Khan said.
And though the FTC’s latest fine is far cry from the $5 billion penalty the agency issued against Facebook in 2019 and represents just a portion of the billions Fortnite reportedly rakes in each year, supporters said it nonetheless represents more than a mere slap on the wrist.
“This agreement is not a parking ticket—it’s a clear demonstration of the FTC’s full-throated commitment to protecting children online and ending the use of dark patterns,” American Economic Liberties Project Executive Director Sarah Miller said in a statement. “By securing both the largest fine and refund in the Commission’s history, the agency is showing once again that laws are not suggestions—especially when kids’ well-being is on the line.”
The agency said Epic violated child privacy rules and used deceptive design choices.
Kris Holt
·Contributing Reporter
Mon, December 19, 2022
Fortnite maker Epic Games will pay $520 million to settle allegations that it violated the Children’s Online Privacy Protection Act (COPPA) and "tricked millions of players into making unintentional purchases," using deceptive design strategies called dark patterns, the Federal Trade Commission said. The agency notes that there are two separate settlements, each of which broke FTC records.
Epic will pay $275 million for allegedly violating the COPPA rule as part of a proposed federal court order. The agency says that's the largest penalty it has obtained to date over a rule violation. Epic will also refund customers $245 million over its billing practices and use of dark patterns. The FTC claims that's the largest refund in a gaming-related case and its biggest administrative order to date. It will decide whether to finalize the consent order after a 30-day public comment period.
"As our complaints note, Epic used privacy-invasive default settings and deceptive interfaces that tricked Fortnite users, including teenagers and children," FTC chair Lina M. Khan said in a statement. "Protecting the public, and especially children, from online privacy invasions and dark patterns is a top priority for the Commission, and these enforcement actions make clear to businesses that the FTC is cracking down on these unlawful practices.”
Fortnite Chapter 4 Season 1
Fortnite has been a colossal success for Epic. The game generated $9 billion in profit between 2018 and 2019, and $5.1 billion in gross revenue in 2020.
The FTC claimed that Epic violated the COPPA rule by collecting personal data from Fortnite players aged under 13 without notifying or seeking consent from their parents. In its complaint, the FTC said parents who wanted Epic to delete personal information on their kids had to "jump through extraordinary hoops" and even then the company sometimes didn't honor those requests.
The agency also accused Epic of engaging in "unfair practices" and harming children and teens by enabling voice and text chat by default. "Children and teens have been bullied, threatened, harassed and exposed to dangerous and psychologically traumatizing issues such as suicide while on Fortnite," the FTC claimed.
As part of the COPPA settlement, the FTC says there's a first-of-its-kind provision that forces Epic to have more stringent default privacy settings for kids and teens, including making sure that voice and text chat are off by default. The company also needs to delete personal data it has collected on Fortnite players unless a player says they're 13 or over or it gets parental consent to retain the information.
Earlier this month, Epic rolled out "cabined accounts" for young Fortnite, Fall Guys and Rocket League players. It said at the time these accounts provided a safe way for kids to play its games. Without parental consent, users with cabined accounts are locked out of features like using voice chat or buying items from in-game stores with real money.
Fortnite Chapter 4 Season 1
The second complaint accused Epic of using "dark patterns to trick players into making unwanted purchases and [letting] children rack up unauthorized charges without any parental involvement." The FTC claimed that players could be charged when resuming Fortnite from sleep mode, when it was on a loading screen or by accidentally clicking a button next to an item preview option. The agency said these design decisions led consumers to pay "hundreds of millions of dollars in unauthorized charges."
The FTC said children were able to buy V-Bucks, Fortnite's in-game currency, without parental consent until 2018. "Some parents complained that their children had racked up hundreds of dollars in charges before they realized Epic had charged their credit card without their consent," the agency noted. The FTC has targeted the likes of Amazon, Google and Apple for similar reasons in the past.
On top of that, Epic allegedly locked the accounts of users who disputed unauthorized payments with their credit card companies. The FTC said Epic ignored more than a million user complaints and employee concerns over wrongful charges.
Along with the $245 million Epic will pay to cover refunds, the proposed consent order seeks to block it from using dark patterns to charge users or otherwise charge them without obtaining explicit consent. Epic will also agree not to enact blanket bans for accounts that perform chargebacks, only disabling those it suspects of actual fraud. The FTC will send emails to those who made Fortnite in-game purchases when it has more details to share about the refund program.
Epic said in a lengthy statement that, among other things, it has "restored thousands of accounts that were banned due to reported chargebacks under our previous policy." Payment information will no longer be saved by default, with users offered the chance to opt out. This will add more friction to the checkout process and perhaps help to avoid unintended purchases. "We accepted this agreement because we want Epic to be at the forefront of consumer protection and provide the best experience for our players," the company said.
This isn't the end of Epic Games' legal troubles when it comes to Fortnite, which the FTC notes has more than 400 million players. Earlier this month, a judge ruled that a Quebec class action suit claiming the game is addictive (leading one child to reportedly spend more than $6,000 CAD on skins) could move forward.
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