Epic Games to pay record $520 million fine over Fortnite’s dark billing practices and children’s privacy violation

The US Federal Trade Commission (FTC) has hit Epic Games with a $520 million fine. The Fortnite maker will pay a whopping sum for violating children’s privacy law and tricking players into making unwanted purchases.

Why did the FTC decide to fine Epic Games?

According to the official ruling, an agreement between the FTC and Epic Games involves two record-breaking settlements.

The company will pay a $275 million fine for violating the Children’s Online Privacy Protection Act (COPPA), a federal law aimed at regulating the collection of personal data from kids under 13 years old by US-based companies and protecting children’s privacy.

Epic Games will also pay $245 million to refund users affected by the company’s “dark patterns and billing practices.” This is the largest administrative order in history and the largest refund amount in a gaming case.

“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,” FTC chair Lina Khan said in a statement.

Under Khan’s leadership, the Commission started a crusade against Big Tech. It has already challenged Meta’s acquisition of VR developer Within Unlimited and filed an antitrust lawsuit against Microsoft to block its $68.7 billion acquisition of Activision Blizzard.

What rules has Epic Games violated?

• According to the FTC, the company collected personal data from children without obtaining their parents’ consent and allegedly failed to comply with parents’ requests to delete such information.
• The FTC also ruled that Fortnite’s default setting enabling text and voice communication resulted in harm to kids who “have been bullied, threatened, harassed, and exposed to dangerous and psychologically traumatizing issues such as suicide.”
• Epic Games also used dark patterns to trick children into making unintended in-game purchases. This was made possible thanks to Fortnite’s confusing button configuration that led to “hundreds of millions of dollars in unauthorized charges for consumers.”
• Up until 2018, Epic Games also allowed children to purchase V-Bucks without obtaining their parents’ consent.
• The company also blocked access to accounts of users who disputed unauthorized charges, resulting in the loss of thousands of dollars worth of in-game content. According to the FTC, Epic Games ignored over 1 million user complaints.

What does Epic Games say about the settlement?

In a response posted on its official website, Epic Games argued that “statues written decades ago don’t specify how gaming ecosystems should operate.”

The company said it accepted the settlement because it wants to be “at the forefront of consumer protection and provide the best experience for our players.” However, it noted that the laws need to be changed as the games industry continues to evolve.

Epic Games also detailed all the changes it has made over the years related to Fortnite’s payment and refund systems, as well as children’s privacy.

It mentioned the recent launch of Cabined Accounts aimed at letting young users play Fortnite in tailored and safe mode — with chat and in-app purchases disabled — while waiting for their parents’ consent.

As part of the agreement with the FTC, Epic Games will have to implement new privacy default settings for children, ensuring that voice and text communications are turned off by default.