Published: Mon, January 28, 2019
Business | By Pearl Harrison

Memos: Facebook allowed 'friendly fraud' to profit from kids

Memos: Facebook allowed 'friendly fraud' to profit from kids

The social media giant reportedly asked game developers to respond to refund requests by issuing "free virtual goods" instead of money.

A Facebook employee responding to Angry Birds maker Rovio's concerns about refund requests from parents emailed colleagues to say that almost all the parents knew their children were playing the game, but didn't think they could make purchases within it without parental approval, a released document showed.

The report suggests that Facebook quelled internal attempts to end the practice.

Facebook knew children were spending money in games without getting parental consent and the company did nothing about it, according to newly unsealed court documents from a 2012 lawsuit.

According to newly unsealed court documents, Facebook's was aware of children blindly throwing away their parent's money on Facehook-connected games, thought of a solution, but then made a decision to do nothing because it would slow down revenue.

The report states Facebook had solutions in place to keep children from over spending in browser games hosted by the social network.

The report is based on the more than 135 pages of unsealed documents that include internal company memos, secret strategies and employee emails, according to Reveal. In the worst case, one boy, who was reportedly 12-years-old at the time, spent $610.40 on "Ninja Saga" before his mother's credit card company flagged up the unusual activity.

While the documents are old, they shed light on Facebook's past business practices as the company continues to be under huge scrutiny for its numerous privacy breaches. An earlier internal study showed that in a three month time period, October 12, 2010 to January 12, 2011, children had spent $3.6 million on these games. They were part of a lawsuit centered on allegations that Facebook knowingly gouged teenagers by permitting them to spend hundreds of dollars buying additional features on games such as "Angry Birds" and "Barn Buddy".

Another exhibit showed a Facebook employee querying why "most of these games with FF-minor problems" were "defaulting to the highest-cost setting in the purchase flows".

"Nina Saga" is one of the Facebook games mentioned in the class action suit. Meanwhile, some parents were unaware that Facebook stored their credit card information and when they would reach out to credit card companies to claim their money back, it would lead to Facebook racking up chargeback rates as high as 9 per cent of the revenue.

A full overview of the particularly troubling bits of what was released can be found over on Reveal's website, including links to the released documents and snippets of conversations between Facebook and the developers of the games in question.

The lawsuit that led to the release of the documents was eventually settled in 2016, when Facebook agreed "to dedicate an internal queue to refund requests for in-app purchases made by USA minors".

In a statement, Facebook said it "works with parents and experts to offer tools for families navigating Facebook and the web". Bohannan filed a lawsuit after finding it impossible to reach Facebook for a refund. With that settlement, Facebook agreed "to dedicate an internal queue to refund requests for in-app purchases made by USA minors".

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