Internal memos called it "friendly fraud"

Facebook’s ‘deceptive’ practices let children run up huge credit card bills

New unsealed court documents have seen Facebook accused of intentionally targeting children in order to boost its game-related revenue.

According to a detailed report in Reveal (via Reddit), Facebook was instructed to publicly share some of its documentation – which spans from 2010 to 2014 – by a U.S. District Court Judge following a class-action lawsuit. The papers intimate that Facebook set about deliberately targeting minors/children in a campaign designed to dupe them and their parents into paying thousands of dollars to maximise profits in games like Angry Birds, PetVille, and Ninja Saga.

Internally dubbing the practices as “friendly fraud” that went against some of Facebook’s own staff’s efforts to protect children on its platform, the company acknowledged that most children weren’t even aware that they were spending “real” money at all. When children and their parents found out about the huge spending and demanded refunds – as much as $6,500 in one case – Facebook employees were told to deny refund requests and called the children “whales”, the same word given to high spenders in the gambling industry.

Facebook’s own analysis saw that from 12th October 2010, to 12th January 2011, children had “spent a whopping $3.6 million”. Roughly 9 per cent of this revenue was refunded through the credit card companies; by comparison, most companies have a 0.5 per cent clawback, and 1 per cent is considered a “high” percentage. Anything over 2 per cent is thought to be a “red flag” indicator of a “deceptive” business.

After the company doubled down on refund refusals, many parents were left with no recourse but to pursue the issue through their credit card providers and the US Better Business Bureau. So many parents pursued their claims with the Bureau that the Federal Trade Commission would usually “red flag” such a company for what Reveal calls “deceptive business practices”.

Identifying “a huge need to educate developers”, Facebook employees were encouraged to tell developers to dismiss complaints and chargeback requests by instead giving away free virtual items as “virtual goods bear no cost”.

Even Facebook’s reporting and contact methods were apparently intentionally convoluted; “I was stuck in an infinite-loop of questions just today,” one employee emailed after an internal test, while another said: “This makes us think – how many users give up.”

Angry Birds developer Rovio was reportedly concerned about Facebook’s unusually high chargeback rates. “We have been seeing refund rates of 5-10 per cent in terms of credits spent so far on Angry Birds. This seems quite high to me, but it might just be normal for games on Facebook,” a Rovio employee said via email to their Facebook counterpoint.

A subsequent investigation into Angry Birds’ demographics showed that the game’s average Facebook player – reportedly just five years old – was usually playing with a parent’s permission, but 93 per cent of the time, parents had no idea the child could buy in-game items without their permission.

Facebook declined to answer specific questions from Reveal, but said in a statement: “We were contacted by the Center for Investigative Reporting last year, and we voluntarily unsealed documents related to a 2012 case about our refund policies for in-app purchases that parents believe were made in error by their minor children. We intend to release additional documents as instructed by the court.

“Facebook works with parents and experts to offer tools for families navigating Facebook and the web. As part of that work, we routinely examine our own practices, and in 2016 agreed to update our terms and provide dedicated resources for refund requests related to purchased made by minors on Facebook.”

About Vikki Blake

It took 15 years of civil service monotony for Vikki to crack and switch to writing about games. She has since become an experienced reporter and critic working with a number of specialist and mainstream outlets in both the UK and beyond, including Eurogamer, GamesRadar+, IGN, MTV, and Variety.

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