FTC reaches record $520 million settlement with Epic Games

Epic Games, the creator of the hit Fortnite game, will pay the Federal Trade Commission a record $520 million to settle claims that it violated children’s privacy.

The North Carolina-based company’s popular game tricked millions of players into making unintended purchases, the FTC said in a statement Monday.

As a result, Epic has agreed to pay $275 million for violating the Children’s Online Privacy Protection Act, the largest penalty ever obtained for violating an FTC rule.

Epic will also pay $245 million to reimburse consumers, which the regulator said was the largest refund in a gaming case. Under the settlement, Epic will enforce new default privacy settings for children and teens that ensure voice and text communications are turned off by default.

“Epic used privacy-invasive default settings and deceptive interfaces that misled Fortnite users, including teenagers and children,” FTC Chairwoman Lina M. Khan said in a statement. “Protecting the public, and especially children, from online privacy invasions and shady patterns is a top priority for the Commission, and these enforcement actions make it clear to companies that the FTC is cracking down on these practices and legal”.

Epic Games said in a statement that it agreed to the settlement so it could be “at the forefront of consumer protection and provide the best experience for our players.”

In its release, Epic pointed to outdated statutes governing gaming and said the video game industry was moving fast and expectations were high.

“This proposed order sends a message to all online providers that the collection of children’s personal information without parental consent will not be tolerated,” said Associate Solicitor General. January Vanita Gupta in a statement.

The FTC said Epic violated its rules by collecting personal information from children under 13 who played Fortnite, without notifying their parents. It also broke the rules by allowing real-time voice and text chat communications for children and teens by default. The FTC said children and teens have been bullied, threatened, harassed and exposed to traumatic issues such as suicide during Fortnite.

The regulator said Epic employees had been warning about the default setting since 2017. Although Epic added a button that allowed users to turn off voice chat, it was difficult to find, the FTC said .

Epic said on Monday that it had already added an additional high privacy default setting for all players under 18, including changes such as automatically hiding profiles and players under 16 also have a mature language filter enabled by default.

In a separate complaint, the FTC alleged that Epic Games used so-called dark patterns to trick users into making purchases.

“Players could load while trying to wake the game from sleep mode, while the game was on a loading screen, or by pressing an adjacent button while trying to simply preview an item,” the regulator said. “These tactics resulted in hundreds of millions of dollars in unauthorized charges to consumers.”

The FTC said Epic received more than 1 million user complaints and there were concerns from employees that a large number of users were being unfairly charged.

“All game developers should rethink the steps they’ve taken to simplify payment flows in favor of practices that provide the greatest amount of clarity to players when making purchase decisions,” Epic said in its statement.

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