Fortnite video game maker Epic Games to pay more than half a billion dollars over Federal Trade Commission allegations of privacy violations and spam fees

The Federal Trade Commission has secured agreements requiring Epic Games, Inc. Inc., creators of the popular video game Fortnite, is set to pay a total of $520 million in relief over allegations that the company violated the Children’s Online Privacy Protection Act (COPPA) and deployed design tricks, known as dark patterns, to trick millions of players into making unintended purchases.

The FTC’s action against Epic includes two separate record-breaking settlements. As part of a proposed federal court order filed by the Department of Justice on behalf of the FTC, Epic will pay a $275 million fine for violating the COPPA rule — the largest penalty ever obtained for violating an FTC rule. Additionally, in a first-of-its-kind provision, Epic will be required to adopt strong default settings for privacy for children and teens, ensuring that voice and text communications are turned off by default. Under a proposed separate administrative order, Epic will pay $245 million to recover consumers for its dark patterns and billing practices, the largest refund to the FTC in a gaming case, and its largest administrative order in history.

“As our complaints indicate, Epic used deceptive privacy default settings and deceptive interfaces that deceived Fortnite users, including teens and children,” said FTC Chair Leena M. Khan. “Protecting the public, especially children, from invasions of online privacy and dark patterns is a top priority for the commission, and these enforcement actions demonstrate to businesses that the FTC is cracking down on these illegal practices.”

“The Department of Justice takes very seriously its mission to protect consumers’ data privacy rights,” said Assistant Attorney General Vanita Gupta. “This proposed order sends a message to all online service providers that the collection of children’s personal information without parental consent will not be tolerated.”

The Fortnite video game by Epic is generally free to download and play but charges users for in-game items such as costumes and dance moves. The game has more than 400 million users around the world. The FTC alleged in two separate complaints that North Carolina-based Epic engaged in numerous illegal practices.

“Epic puts children and teens at risk through lax privacy practices, and costs consumers millions in illegal fees through its use of dark patterns,” said Samuel Levine, director of the Federal Trade Commission’s Office of Consumer Protection. Under the proposed orders announced today, the company would be required to change its default settings, return millions to consumers, and pay a record fine for privacy violations.

privacy violations

In a complaint filed in federal court, the FTC alleged that Epic violated a COPPA rule by collecting personal information from children under 13 who played Fortnite, an online service aimed at children, without notifying their parents or obtaining their verifiable parental consent. Of which. Epic also violated the FTC’s prohibition on unfair practices by enabling real-time voice and text chat communications to children and teens by default. Specifically, the FTC has alleged that Epic:

  • You violated the Children’s Online Privacy Protection Act (COPPA) by not notifying the parents and obtaining consent: The FTC alleged that Epic knew that many children were playing Fortnite — as indicated by surveys of Fortnite users, licensing and marketing of Fortnite games and merchandise, player support, and other company communications — and collected personal data from children without obtaining First on the parents’ data. Verifiable approval. The company has also required parents who have requested deletion of their children’s personal information to jump through unreasonable hoops, and has sometimes failed to honor those requests.
  • Default settings harm children and teens: Epic settings enable live text and voice communications by default for users. The FTC claims that these default settings, along with Epic’s role in matching kids and teens with strangers to play Fortnite together, harmed kids and teens. Children and teens have been bullied, threatened, harassed, and experienced serious problems and trauma such as suicide while in Fortnite.

Epic employees have expressed concern about the default settings. As early as 2017, Epic employees urged the company to change the default settings to require users to engage in voice chat, citing concern about the impact on children in particular. Despite this and reports that children had experienced harassment, including sexual harassment, while playing the game, the company resisted turning off the default settings. And while it eventually added a button that would allow users to turn off voice chat, Epic made it harder for users to find it, according to the complaint.

In addition to paying the standard civil penalty, which goes to the US Treasury Department, for violating the COPPA rule, the proposed federal court order would prohibit Epic from enabling voice and text communications to children and teens unless it is a parent (for users under 13) or a teen. Users (or their parents) provide their affirmative consent through the privacy setting. Epic shall delete previously collected personal information from Fortnite users in violation of COPPA’s Parental Notice and consent requirements unless the Company obtains parental consent to retain such data or if the user identifies as 13 or older through an age-neutral portal. In addition, Epic must establish a comprehensive privacy program that addresses the issues identified in the FTC complaint, and obtain regular, independent audits.

The commission voted 4-0 to refer the civil penalty complaint and proposed federal order to the Department of Justice. The Department of Justice filed the complaint and ordered an injunction in the US District Court for the Eastern District of North Carolina. Commissioner Kristin S. Wilson issued a separate statement.

note: The Commission authorizes a complaint to be filed when it has “reason to believe” that the named defendant is in violation of, or is about to violate, the law and it appears to the Commission that the action is in the public interest. The orders set forth shall have the force of law when approved and signed by the District Court judge.

Illegal dark patterns

In a separate administrative complaint, the FTC alleged that Epic used dark patterns to trick players into making unwanted purchases and allow children to charge unauthorized fees without any parental involvement. The complaint alleged that Epic:

  • Using dark patterns to trick users into making purchases: The company has published a variety of dark patterns intended to prompt consumers of all ages to make unintentional in-game purchases. Inconsistent and confusing button configuration in Fortnite has resulted in players incurring unwanted charges based on pressing a single button. For example, players could charge while trying to wake the game from sleep, while the game was in a loading screen, or by pressing an adjacent button while trying to preview an item. These tactics have resulted in hundreds of millions of dollars in unauthorized fees being paid to consumers.
  • Account holders charged without permission: Children and other users who play Fortnite can purchase in-game content such as cosmetics and Battle Passes using V-Bucks from Fortnite. Until 2018, Epic allowed kids to purchase V-Bucks simply by pressing buttons without requiring any parental or cardholder action or approval. Some parents have complained that their children have accumulated hundreds of dollars in fees before realizing that Epic has charged their credit card without their consent. The Federal Trade Commission (FTC) has filed similar lawsuits against companies like Amazon, Apple and Google for billing consumers millions of dollars for in-app purchases made by children while playing mobile app games without their parents’ consent.
  • Restricted access to purchased content: The FTC alleged that Epic closed the accounts of customers who disputed unauthorized charges with their credit card companies. Consumers whose accounts are locked lose access to all content they have purchased, which can run into thousands of dollars. Even when Epic agreed to open an account, consumers were warned they could be banned for life if they objected to any future fees.

Epic has ignored more than a million user complaints and reiterated employee concerns that “huge” numbers of users were being wrongly charged. The FTC claimed that the changes made by Epic actually exacerbated the problem. Using internal testing, Epic intentionally obscured cancellation and refund features to make them more difficult to find.

As part of the proposed administrative order with FTC In connection with the company’s illegal billing practices, Epic must pay $245 million, which will be used to provide refunds to consumers. In addition, the order prohibits Epic from charging consumers through the use of dark patterns or from charging consumers other fees without their affirmative consent. The order also prohibits Epic from blocking consumers from accessing their accounts to dispute unauthorized charges.

The panel voted 4-0 to release the proposed administrative complaint and accept the consent agreement with Epic regarding deceptive billing practices.

The FTC will publish a description of the consent agreement package in the Federal Register soon. The agreement will be subject to public comment for 30 days after it is posted to the Federal Register after which the committee will decide whether to make the proposed approval order final. Instructions for submitting comments will appear in the posted notice. Once processed, comments will be posted to the regulations.

note: The commission issues an administrative complaint when it has “reason to believe” that a law has been or is being violated, and it appears to the commission that the action is in the public interest. When the Commission issues an approval order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order could result in a civil penalty of up to $46,517.

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