Fortnite creator Epic Games to pay record FTC fine over violating children’s privacy
Epic Games, the Cary-based creator of the popular video game Fortnite, has agreed to pay a record $520 million to the Federal Trade Commission over complaints that the company violated children’s privacy law and induced unintended purchases through deceptive designs.
The “record-breaking” settlement, which the FTC announced Monday, is divided into two complaints.
Of the $520 million, the FTC will use $245 million to refund Fortnite consumers that meet certain eligibility requirements. Epic agreed to pay the FTC for what the government described as “dark patterns to trick players into making unwanted purchases” which targeted children without their parents’ knowledge.
The remaining $275 million is a fine Epic will pay for violating the Children’s Online Privacy Protection Act (COPPA), the largest amount the FTC has collected under COPPA since the law went into effect in 2000. In a statement, FTC Chair Lina Khan said Epic maintained “privacy-invasive default settings and deceptive interfaces that tricked Fortnite users, including teenagers and children.”
The FTC accused Epic of obtaining “personal information from children under 13 who played Fortnite” without first alerting parents or gaining their consent. As part of its agreement, Epic must also adopt stricter privacy settings for minors, including turning off text and voice communications as default settings. The government said having these communication channels open facilitated the bullying and harassment of minors.
Epic released Fortnite in 2017, and the game rapidly ascended in popularity. At any given time, a few million people are playing it worldwide. The game is free to play, and Epic makes money from players purchasing cosmetic items like dance moves and costumes using an in-game currency called V-bucks. Set in a candy-colored universe, the shooting game is geared toward younger players.
In a statement following the FTC announcement, Epic Games spokesperson Candela Montero did not acknowledge any wrongdoing but said the company “accepted this agreement because we want Epic to be at the forefront of consumer protection and provide the best experience for our players.”
“No developer creates a game with the intention of ending up here,” Montero said.
Epic’s ‘confusing’ button configuration
According to the FTC, Epic maintained a design that prompted accidental in-game charges, even after more than a million users and many employees raised concerns dating back to 2017.
The commission said Fortnite’s “confusing” layout caused players to make unintended purchases with the press of a single button, including when trying to wake the game from sleep mode. It added that Epic “locked the accounts of customers who disputed wrongful charges with their credit card companies” and “purposefully obscured” refund and cancel buttons.
The FTC noted it has filed similar claims against other tech companies like Google, Apple, and Amazon for billing young consumers who made hefty purchases without their parents’ knowledge.
Epic said it will begin offering customers an explicit “yes or no choice” for whether they wish to save their payment information in the Epic Games Store. The company has also updated its payment system to include a “hold-to-purchase” mechanism to decrease involuntary purchases while it also implemented a daily cap on spending for customers under 13.
“The video game industry is a place of fast-moving innovation, where player expectations are high and new ideas are paramount,” Montero said. “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.”
Who is eligible for refunds?
The FTC detailed three groups who will be eligible for refunds, though it has not yet released a timeline for when the money will be distributed.
Parents of children who made unauthorized credit card purchases in the Epic Games Store from January 2017 to November 2018.
Fortnite players charged for unwanted in-game purchases from January 2017 to September 2022.
Fortnite players who had their accounts locked after disputing unauthorized credit card charges from January 2017 to September 2022.
The commission said it will email customers who made in-game purchases once it has more details on its refund program. Consumers are advised to go to FTC.gov/Fortnite for updates and to sign up for emails on the refunds.
Epic facing class-action suit
The privately-held Epic, founded in 1991 by CEO Tim Sweeney, was valued around $32 billion last April following a major investment from Sony. The company reports it employs more than 1,000 people in Cary, and it purchased Cary Towne Center nearly two years ago with the hopes of converting it into a new global headquarters.
In 2021, Sweeney was ranked by Forbes as the wealthiest person in North Carolina with an estimated net worth of $7.4 billion.
The settlement comes as Epic is engaged in ongoing litigation with Apple over how Apple charges in-app purchases through its App Store. Epic also faces a class action lawsuit in Canada over Fortnite being designed too be overly addictive for children. A Quebec judge permitted the suit to proceed earlier this month.
This story was produced with financial support from a coalition of partners led by Innovate Raleigh as part of an independent journalism fellowship program. The N&O maintains full editorial control of the work.
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