FTC urged to investigate how Facebook 'tricked' kids

An influential privacy organization is asking the Federal Trade Commission to investigate whether Facebook "has engaged in unfair or deceptive practices" that would violate the Children's Online Privacy Protection Act.

A letter dated Thurday asked Commission Secretary Donald S. Clark, as well as Andrew Smith of the Bureau of Consumer Protection, to look into the issue.

"This request is based on Facebook's practices that recently came to light when a court granted a request from the Center for Investigative Reporting to unseal documents from a class action lawsuit brought in 2012. Plaintiffs in the lawsuit alleged that Facebook tricked children into making in-game purchase and then made refunds almost impossible to obtain," the letter from the Electronic Privacy Information Center said.

The case was settled in 2016.

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But EPIC, on behalf of a "coalition of consumer groups," said, "Parents and minors repeatedly complained about the credit card charges, but the documents indicate that the company refused to refund charges and set up a complex complaint system to deter refund requests."

EPIC is concerned at least partly because it helped enact the children online privacy law.

The letter explains, "The unsealed documents show that for years – at least as far back as 2010 and as recently as 2014 – Facebook maintained a system that encouraged children to make unknowing and unauthorized credit card purchases for virtual items in games on Facebook's platform."

Then followed the "labyrinthine complaint system."

"Internal documents also reveal that the company was aware that games on its platform were popular with children as young as five," the coalition letter said.

"The practice of charging children for purchases made without parental consent, and often without parental awareness, constitutes an unfair practice under the FTC Act. … Indeed, the FTC and a federal court have already found this type of conduct is unfair," the letter continued.

That case involved Apple, Google and Amazon, and the FTC warned "the companies acted unfairly in permitting children to make in-app purchases when it was not clear when a purchase was being made and when parents were not given a choice whether to allow the minor child's purchases."

That resulted in agreements that the companies were required to obtain express, informed consent from consumers for those purchases and offer refunds of up to $70 million.

"Facebook users should be entitled to similar relief," the letter said.

The fact that the previous case was settled is not a reason not to investigate further, the letter explained.

"The settlement agreement expires in May 2019. Without FTC action, Facebook could resume these unfair practices."

The original agreement also puts the burden of getting permission on the children and then on the parents to seek a refund, if they believe that's appropriate.

"Nor does the settlement agreement make whole the consumers harmed by Facebook's unfair practices," because it does not demand Facebook offer refunds to its victims.

"Indeed, Facebook's Help Center guidance for games still indicates children can rack up charges on parents' accounts without a parent realizing it."

The letter notes one teen incurred $6,500 in charges in a few weeks.

"Facebook deceived consumers for years, and the costs were substantial – for example, in just one three month period, consumers lost hundreds of thousands of dollars they did not intent to spend."

The letter charges, "Facebook took advantage of unsuspecting kids, one of whom employees referred to as a 'whale,' using casino parlance to refer to the child's high volume of purchases."

The deception was embedded in the games, since they defaulted "to the highest cost settings" when children were playing.

Sometimes, the sales were so much a part of the game, "children did not realize they were spending real money."

Further, Facebook didn't even bother letting parents know of the purchases, the letter said.