Minors unintentionally spent a lot of money in online games – Facebook even enforced this practice, as was revealed in a lawsuit.
Facebook is said to have systematically persuaded minors to spend money on online games for years, and their parents subsequently refused to refund them to generate more profit. In individual cases, this involves several hundred or even thousands of US dollars, as has now become known in the context of a class-action lawsuit in the USA. This reports the website Reveal, which belongs to the non-commercial organization Center for Investigative Reporting.
Unintentional purchases by minors in online games
The approximately 135-page documents released by Facebook as part of the lawsuit include internal company memos, confidential strategy papers, and messages from Facebook employees from 2010 to 2014, Reveal writes. The class-action lawsuit at a US district court in 2012 is directed against Facebook’s business practices when buying minors in online games. For titles such as “Angry Birds”, “PetVille”, “Happy Aquarium” or “Ninja Saga”, children have equipped their game characters with items that are subject to a charge and have spent money without the consent of their parents.
According to Reveal, despite knowledge of the situation, Facebook has even encouraged game developers to continue to motivate children to buy without parental consent. According to the court documents, the company has downplayed this approach internally as “friendly fraud” and also as part of its game strategy. The children were sometimes not even aware that they were currently spending their parents’ money on a linked credit card. In one case, a 15-year-old spent $ 6,500 in two weeks.
Facebook employees spoke of their own “fraud.”
Facebook employees were aware of this, as can be seen from the documents: There is talk of the “problem” that “FF-minors” (minors in connection with the “friendly fraud”) did not realize that they were spending real money would. Another document shows that many parents do not know that Facebook has stored their credit card details and uses them for debits – and that their children could use them to spend money without any authentication.
Facebook is said to have ignored warnings from its employees on the subject for years and even rejected a system developed by employees to prevent such unwanted purchases. With this system, minors should enter the first six digits of their parents’ credit card before making a purchase. The process was tested for a while in 2011 and is believed to have reduced unwanted purchases and the rate of chargebacks. However, Facebook did not use it.
A lot of reclaims from parents
After parents had become aware of the costs caused by their offspring, Facebook mostly refused to reimburse the resulting claims. Instead, Facebook referred the parents to the bank, to an arbitration board, or the lawsuit. According to the documents, the chargeback rates by credit institutions were so high (an internal Facebook report from 2011 gives them an average of 9 per cent) than they would have exceeded the two per cent threshold set by the US FTC for overtly fraudulent business practices,
An employee of Rovio, the developer of “Angry Birds”, had noticed the high refund rates of up to 10 per cent in the game, and he turned to Facebook. Facebook then looked at the matter and determined that 93 per cent of the claims for “Angry Birds” were due to unintentional purchases. A Facebook employee wrote: “In almost all cases, parents knew that their children were playing Angry Birds, but they thought that the children couldn’t buy anything without a password or authorization (as in iOS).” According to Facebook’s investigation, the average age of “Angry Birds” players at this time was five years. This employee also writes that if you block this path, “good profit” will be offered.
Game developers “educate” to stick to practice
However, Facebook decided to keep this practice and launched an internal memo titled: “Friendly Fraud – what it is, why it is challenging, and why you shouldn’t prevent it”. The memo states “maximum profit” as a corporate goal and instructs employees to “educate” game developers accordingly so that children can continue to spend money without their parents’ knowledge. In the event of complaints, the money should not be reimbursed, but the dispute should be settled with free allowances for the game, the memo says.
If parents contacted Facebook via the credit institutions and asked for a refund, the company also planned to use a program that would automatically reject the claims without being checked, as can be seen in another document. According to Reveal, the company was waiting at this time to see whether it could successfully reject enough reclaims so that the use of the automatism made sense – but whether the decision about the deployment was made is not clear from the documents.
On request, Facebook only told Reveal that it regularly reviews its business practices, revised the guidelines in 2016 and has since held special funds for reimbursements of minors’ purchases.
Published internal documents increasingly criticize Facebook’s business practices. In the wake of the Cambridge Analytica data scandal, for example, the British Parliament confiscated documents that were said to reveal the company’s knowledge. The whistleblower Christopher Wylie, who was responsible for the announcement of this scandal, also reaffirmed that Facebook had known about it from the start.