Epic Games Inc. has agreed to pay $520 million to resolve allegations by the Federal Trade Commission that the “Fortnite” video game developer violated children’s online privacy and tricked gamers into making unintentional purchases.
The FTC said the agreement consists of two record-breaking settlements that resolve two civil lawsuits it has filed against Epic. One filed in federal court alleged that the company violated the federal Children’s Online Privacy Protection Act by collecting personally identifiable information from “Fortnite” players under the age of 13 without notifying their parents or a verifiable one obtain parental consent.
The lawsuit also accused the company of illegally enabling real-time voice and text chat communications for children and young people in-game by default. Additionally, the FTC said that Epic put these users at risk by associating them with strangers, and as a result, some were “bullied, threatened, harassed, and exposed to dangerous and psychologically traumatizing issues like suicide.”
Epic will pay a $275 million civil penalty for the alleged COPPA violations, the FTC said, the largest assessed in the commission’s enforcement of the privacy law.
Epic has neither admitted nor denied the FTC’s allegations in the settlements. The company could not be immediately reached for comment.
The commission also said the company agreed to pay $245 million in consumer refunds to resolve the second complaint filed with the Administrative Court. It is the FTC’s largest settlement, banning the use of so-called dark patterns, tactics that trick customers into paying for goods and services and create barriers to cancellation.
The agency claimed Epic used a variety of tactics to encourage unintentional purchases of virtual perks like outfits and dance moves in “Fortnite,” including using counterintuitive, inconsistent, and confusing button configurations. “These tactics resulted in hundreds of millions of dollars in unauthorized consumer charges,” it said.
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The FTC further alleged that Epic intentionally obfuscated cancellation and refund features to make them harder to find, and that the company suspended the accounts of customers who disputed unauthorized charges with their credit card companies.
Even when Epic agreed to unlock an account, consumers were warned that if they disputed future charges, they could be banned for life, the FTC said.
Fortnite debuted in 2017 and quickly became one of the world’s most popular shooter video games and a cultural phenomenon. Tightly held Epic was last valued at nearly $32 billion in April. The Cary, NC company includes Sony Group Corp. and China’s Tencent Holdings Ltd. to its investors.
Earlier this month, Epic introduced a new type of account designed to provide a safe and inclusive experience for players under the age of 13. Users who sign up for it won’t be able to access features like chat and purchases unless they get permission from a parent or guardian.
As part of the dual settlements, the FTC said Epic is committed to making a number of changes to “Fortnite” to protect users and establish a privacy program that addresses the issues identified in their complaints. The company must also receive regular, independent audits, the agency said.
Consumers who believe they have been wrongly charged for in-game purchases can go to a website set up by the FTC to request refunds, the commission said. It will likely take several months or more to process those claims, the FTC said.
The FTC has increased criminal prosecutions against companies with websites or apps that make it easier for consumers to make unintended purchases and make it harder for them to get refunds. Last month, Ericsson AB’s subsidiary Vonage agreed to pay $100 million to settle FTC allegations that it created a web of barriers for its customers to cancel its internet-based phone service and charged unexpected termination fees have. The penalty was the agency’s largest with dark patterns before the Epic case.
YouTube and TikTok agreed settlements with the FTC after they were accused of violating children’s online privacy laws in 2019. YouTube, a unit of Alphabet Inc.’s Google, paid a $170 million fine. This was a record penalty for a COPPA violation, even pending the Epic settlement.
Write to Sarah E. Needleman at [email protected], Aaron Tilley at [email protected], and Brent Kendall at [email protected]
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