Epic Games, maker of “Fortnite,” will pay $520 million to settle FTC charges

Epic Games, maker of “Fortnite,” will pay 0 million to settle FTC charges

Epic Games Inc. has agreed to pay $520 million to settle Federal Trade Commission allegations that video game developer “Fortnite” violated children’s online privacy and tricked players into making unintended purchases.

The FTC said the deal consisted of two record settlements that resolve a pair of civil complaints it filed against Epic. One, filed in federal court, alleged that the company violated the federal Children’s Online Privacy Protection Act by collecting personal information from “Fortnite” players under the age of 13 without notifying parents or obtaining verifiable parental consent.

That lawsuit also accused the company of illegally enabling real-time voice and text chat communications for children and teens in the game by default. Further, the FTC said that Epic put these users at risk by connecting them with strangers, and as a result some were “bullied, threatened, harassed and exposed to dangerous and psychologically traumatizing issues such as suicide.”

Fortnite on a desktop

A player plays the video game “Fortnite: Battle Royale” developed by People Can Fly and Epic Games on May 3, 2018 in Paris, France. (Photo by Chesnot/Getty Images) ((Photo by Chesnot/Getty Images) / Getty Images)

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.

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The company separately agreed to pay $245 million in consumer refunds to resolve the FTC’s second complaint, which was filed in administrative court. It is the FTC’s largest settlement that prevents the use of so-called dark patterns, tactics that trap customers into paying for goods and services and create obstacles to canceling.

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Epic did not admit or deny the FTC’s allegations as part of the settlements.

In this July 27, 2019 photo provided by Epic Games, Emil “Nyhrox” Bergquist Pedersen, of Norway, and David “Aqua” Wang, of Austria, raise their trophies after winning the Fortnite World Cup duo championship in New York. (Epic Games via AP)

“No developer makes a game with the intention of ending up here,” Epic said in a statement. “We accepted this agreement because we want Epic to be at the forefront of consumer protection and provide the best experience for our players.”

FTC Chairman Lina Khan said protecting the public, especially children, from online privacy invasions and deceptive practices was a top priority. “These enforcement actions make clear to businesses that the FTC is cracking down on these illegal practices,” she said.

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The FTC’s second complaint alleged that Epic used a variety of tactics to drive unintended purchases of virtual currency to obtain perks such as outfits and dance moves in “Fortnite,” including the use of counterintuitive, inconsistent and confusing button configurations. “These tactics resulted in hundreds of millions of dollars in unauthorized charges to consumers,” it said.

Fortnite Rift Tour with Ariana Grande

Fortnite Rift Tour with Ariana Grande (Fortnite)

The FTC further alleged that Epic intentionally hid cancellation and refund features to make them harder to find, and that the company locked the accounts of customers who disputed unauthorized charges with their credit card companies.

Even when Epic agreed to unlock an account, consumers were warned they could be banned for life if they disputed any future charges, the FTC said.

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“Fortnite” debuted in 2017 and quickly became one of the world’s most popular shooting games and a cultural phenomenon. Closely held Epic was last valued at nearly $32 billion in April. The Cary, NC, company counts Sony Group Corp. and China’s Tencent Holdings Ltd. among its investors.

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Earlier this month, Epic unveiled a new type of account that it said was designed to provide a safe and inclusive experience for players under the age of 13. Users who sign up for it cannot access features such as chat and purchases unless they get consent from a parent or guardian.

As part of the dual settlements, the FTC said Epic is required to make a number of changes to “Fortnite” to protect users, as well as establish a privacy program that addresses the issues identified in the complaints. The company must also obtain regular, independent audits, the agency said.

Consumers who believe they were unfairly charged for in-game purchases can go to a website set up by the FTC to request a refund, the commission said. It will likely take several months or longer to process these claims, the FTC said.

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The FTC has increased enforcement against companies with websites or apps that make it easy for consumers to make unintended purchases and difficult for them to get refunds. Last month, Ericsson AB subsidiary Vonage agreed to pay $100 million to settle FTC allegations that it created a web of obstacles for its customers to cancel its Internet-based phone service and charged unexpected termination fees. The penalty was the agency’s largest with dark patterns before the Epic case.

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YouTube and TikTok agreed to settlements with the FTC after being 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 fine for a COPPA violation, even until the epic settlement.

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