The Federal Trade Commission (FTC) has secured agreements requiring Epic Games to pay $520 million in penalties and fines.
Specifically, Epic will pay a $275 million penalty for violating children’s privacy law and agree to change default privacy settings. In addition, the company will pay $245 million in refunds for tricking users into making unwanted charges.
FTC Allegations Against Epic
Epic will pay a $275 million monetary penalty for violating the COPPA Rule. The Children’s Online Privacy Protection Act (also known as COPPA) allows parents to control what information websites can collect from their kids.
This is the largest penalty ever obtained for violating an FTC rule. Furthermore, in a first-of-its-kind provision, Epic is required to adopt strong privacy default settings for children and teens. The company must ensure that voice and text communications are turned off by default.
Under a separate agreement, Epic will pay $245 million to refund consumers for its dark patterns and billing practices. This is the FTC’s 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 M. 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.”
“Epic put children and teens at risk through its lax privacy practices, and cost consumers millions in illegal charges through its use of dark patterns,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Under the proposed orders announced today, the company will be required to change its default settings, return millions to consumers, and pay a record-breaking penalty for its privacy abuses.”
History of the FTC Epic Case
Epic employees expressed concern about its default settings as early as 2017. Epic employees urged the company to change the default settings to require users to opt-in for voice chat. They cited concern about the impact on children in particular. However, the company resisted turning off the default settings. This is despite the fact that children had been harassed, including sexually, while playing the game. Eventually, the company added a button allowing users to turn voice chat off. However, according to the complaint, Epic made it difficult for users to find.
Up until 2018, Epic allowed children to purchase V-Bucks by simply pressing buttons without requiring any parental or cardholder 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 cards without their consent. The FTC has brought similar claims against companies such as 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 alleged that Epic locked the accounts of customers who disputed unauthorized charges with their credit card companies. Consumers with locked accounts lose access to all the content they have purchased. This can total thousands of dollars. Even when Epic agreed to unlock an account, the company warned consumers that it could ban them for life if they disputed any future charges.
Disputed Credit Card Charges
Epic ignored more than one million user complaints. The company also ignored repeated employee concerns that it had wrongfully charged “huge” numbers of users. In fact, Epic’s changes only made the problem worse, the FTC alleged. Using internal testing, Epic purposefully obscured cancel and refund features to make them more difficult to find.
As part of the proposed administrative order with the FTC over the company’s unlawful 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 otherwise charging consumers without obtaining their affirmative consent. The order also bars Epic from blocking consumers from accessing their accounts for disputing unauthorized charges.
Response by Epic Games
In a statement released by Epic Games, the company acknowledged the issues raised by the FTC. Epic stated: “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.”
The statement continued: “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.”
Remedies that Epic has Implemented
some of the payment and refund features that are live in Fortnite today include:
- No pay-to-win or pay-to-progress mechanics in player-versus-player experiences.
- No paid random item loot boxes since 2019 and no gambling ever.
- A Return Tickets system that enables self-service refunds on eligible digital goods without the need to specify a reason.
- Instant cancellations of cosmetic purchases made with V-bucks, with a recently extended cancellation window.
- A hold-to-purchase mechanic for all in-game purchases in Fortnite.
- An updated chargeback policy.
- An explicit yes/no choice to save payment information.
Remedies for younger players and their parents
- Parental Controls are easily accessible in the main Fortnite Lobby menu and the Epic Account portal.
- Parental Controls include the option to require a PIN to send and accept friend requests.
- A daily spending limit for players under the age of 13.
- Granular privacy options for chat, which include “Everybody,” “Friends and Teammates,” “Friends Only,” or “Nobody.”
- Cabined Accounts provide a tailored experience that is safe and inclusive for younger players while they wait for parental consent.
- Settings that default to the highest privacy option for players under the age of 18, including voice and text chat defaulting to “Nobody.”
Epic concluded with the following statement: “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”.