Fortnite Maker Epic Games To Pay $520 Million In FTC Settlements – Deadline
UPDATED with Epic Games statement: Epic Games has agreed to pay a total of $520 million in two settlements with the Federal Trade Commission over allegations the Fortnite creator violated the Children’s Online Privacy Protection Act, and that it used design tricks to dupe millions of players into making unintentional purchases.
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 for violating the privacy reg — the largest penalty ever obtained for violating an FTC rule, the agency said.
Separately, the game maker will pay $245 million under a proposed administrative order to refund consumers for its so called “dark patterns” billing practices. The FTC called this the largest refund amount in a gaming case, and its largest administrative order in history.
“As our complaints note, Epic used privacy-invasive default settings and deceptive interfaces that tricked Fortnite users, including teenagers and children,” said FTC Chair Lina Khan. “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.”
“The Justice Department takes very seriously its mission to protect consumers’ data privacy rights,” added Associate Attorney General Vanita Gupta. “This proposed order sends a message to all online providers that collecting children’s personal information without parental consent will not be tolerated.”
Epic acknowledged that longstanding industry practices are not enough, noting changes and new features it’s already put in place.
“No developer creates a game with the intention of ending up here. 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. The laws have not changed, but their application has evolved and long-standing industry practices are no longer enough. We accepted this agreement because we want Epic to be at the forefront of consumer protection and provide the best experience for our players.
“Over the past few years, we’ve been making changes to ensure our ecosystem meets the expectations of our players and regulators, which we hope will be a helpful guide for others in our industry,” it said.
The FTC alleged Epic violated the Children’s Online Privacy Protection Act (called COPPA) by collecting personal information from kids under 13 who played Fortnite without notifying their parents or obtaining their parents’ verifiable consent. Epic also violated the FTC Act’s prohibition against unfair practices by enabling real-time voice and text chat communications for children and teens by default.
Epic employees expressed concern about its default settings, the FTC said, and as early as 2017, urged the company to change the default settings to require users to opt in for voice chat, citing concern about the impact on children in particular. “Despite this and reports that children had been harassed, including sexually, while playing the game, the company resisted turning off the default settings. And while it eventually added a button allowing users to turn voice chat off, Epic made it difficult for users to find, according to the complaint.”
The FTC had voted 4-0 to refer the civil penalty complaint and proposed federal order to the Department of Justice. The DOJ filed the complaint and stipulated order in the U.S. District Court for the Eastern District of North Carolina, where Epic has its headquarters.
Epic says it has already implemented the high-privacy default settings. Fortnite settings default to the highest privacy option for players under the age of 18, including voice and text chat defaulting to “Nobody.”
As for the “dark patterns aimed at getting consumers of all ages to make unintended in-game purchases,” it said, “Fortnite’s counterintuitive, inconsistent, and confusing button configuration led players to incur unwanted charges based on the press of a single button. For example, players could be charged while attempting to wake the game from sleep mode, while the game was in a loading screen, or by pressing an adjacent button while attempting simply to preview an item. These tactics led to hundreds of millions of dollars in unauthorized charges for consumers.”
Epic’s video game Fortnite, with more than 400 million users worldwide, is generally free to download and play but charges users for in-game items such as costumes and dance moves.
The company also allowed children to purchase Fortnite V-Bucks by simply pressing buttons without requiring any parental or card holder action or consent. 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 FTC has brought similar claims against Amazon, Apple and Google for billing consumers millions of dollars for in-app purchases made by children while playing mobile app games without obtaining their parents’ consent.
The FTC also alleged that Epic locked the accounts of customers who disputed unauthorized charges with their credit card companies. Consumers whose accounts have been locked lose access to all the content they have purchased, which can total thousands of dollars. Even when Epic agreed to unlock an account, consumers were warned that they could be banned for life if they disputed any future charges.
The FTC alleged Epic purposefully obscured cancel and refund features to make them more difficult to find.
The $245 million settlement here will be used to provide refunds to consumers. Under the agreement, Epic must stop charging consumers through the use of “dark patterns” or without obtaining their affirmative consent. It can’t blocking consumers from accessing accounts for disputing charges.
That complain was also approved with a Commission 4-0 vote.
“The old status quo for in-game commerce and privacy has changed, and many developer practices should be reconsidered. We share the underlying principles of fairness, transparency and privacy that the FTC enforces, and the practices referenced in the FTC’s complaints are not how Fortnite operates. We will continue to be upfront about what players can expect when making purchases, ensure cancellations and refunds are simple, and build safeguards that help keep our ecosystem safe and fun for audiences of all ages,” said Epic.
See the company’s full statement here.