The Federal Trade Commission has finalized an order that will require Fortnite developer Epic Games to pay a record $520 million to settle a claim brought against it by the FTC last year. The FTC alleges that the video game maker used dark patterns to trick players into making unauthorized purchases and to let kids make purchases without their parents’ consent. According to the complaint, Epic Games received more than 1 million complaints from consumers for unauthorized charges.

From the $520 million settlement, $245 million will be refunded to consumers and $275 million in penalties will be paid to the U.S. Treasury for violating the Children’s Online Privacy Protection Act (COPPA). According to the FTC, Epic Games collected personal data from children without their parents’ permission. Even when parents asked to have their child’s information deleted, Epic Games sometimes failed to comply. The $275 million penalty is the largest in a COPPA case ever.

Also, Epic Games enabled live on-by-default text and voice communications to users, and they matched children and teens with strangers which could be potentially harmful to the players. The FTC alleges that the young users were “bullied, threatened, harassed, and exposed to dangerous and psychologically traumatizing issues such as suicide” while playing Fortnite. According to the FTC, Epic Games employees expressed concern about the default settings as early as 2017, but their concerns were ignored.

As part of the settlement, Epic Games must adopt privacy default settings for children and teens, so that voice and text communications are turned off by default. They must delete all personal information previously collected that violates COPPA unless they obtain parental consent or the user is 13 years old or older. Also, Epic Games must create a comprehensive privacy program to ensure there will be no further violations. This program must be regularly audited by an outside firm.

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Dark patterns and account locks

The FTC alleges that Epic Games used a range of design tricks, also called dark patterns, to get consumers to make unintended in-app purchases. For example, the game developer used tricky button configurations to authorize purchases with the press of a button. They also made it easy for kids to make purchases without requiring their parents’ consent. When Fortnite players disputed the unauthorized charges with their credit card companies, Epic Games locked those customer accounts.

In the original complaint, the FTC alleged:

“The problem: in many cases, Epic – employing myriad design tricks known as ‘dark patterns’ – has charged consumers for such items without first obtaining their express informed consent, and then has banned consumers for accessing previously paid-for content when they have disputed unauthorized charges with their credit card providers.”

Who can request a refund?

FTC will use the $245 million payment from Epic Games to refund U.S. consumers for unwanted purchases and those impacted by the company’s billing and refund policies. Consumers eligible for a refund include:

• Parents whose children made an unauthorized credit card purchase in the Epic Games Store between January 2017 and November 2018
• Fortnite players who were charged in-game currency, called V-Bucks, for unwanted items such as cosmetics, llamas or battle passes, between January 2017 and September 2022
• Fortnite players whose accounts were locked between January 2017 and September 2022 after they disputed unauthorized charges with their credit card companies

For more information about refunds and eligibility, visit FTC.gov/fortnite.

Future compliance

As part of the settlement agreement, for the next 20 years, Epic Games must provide a copy of the order to all principals, officers, directors, and LLC managers and members; all employees with managerial responsibilities for conduct related to the order; and any business entity resulting from any change in structure. Also, Epic Games must submit a compliance order within one year of the issue date of the order and each year for the next 10 years. The company must also notify the FTC of any bankruptcy petitions.

Insider Take

There isn’t much to add to what the FTC has already said. Based on the FTC’s findings, Epic Games violated the FTC Act and COPPA, and they will pay dearly for it. It is really sad to see companies who blatantly violate consumer protect laws, not to mention ethics at every level, and to mistreat their customers. One million unhappy customers cannot help anyone’s business. Bottom line: Get express informed consent, make language and buttons clear, and follow the law. Don’t take shortcuts. You may not get caught for awhile, but you will get caught.

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