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Gaming company to pay $520 million to resolve FTC allegations

Federal Issues FTC DOJ Enforcement Privacy, Cyber Risk & Data Security COPPA FTC Act Unfair UDAP Consumer Finance Dark Patterns

Federal Issues

On December 19, the DOJ filed a complaint on behalf of the FTC against a video game developer for allegedly violating the Children’s Online Privacy Protection Act (COPPA) by failing to protect underage players’ privacy. The FTC also alleged in a separate administrative complaint that the company employed “dark patterns” to trick consumers into making unwanted in-game purchases, thus allowing players to accumulate unauthorized charges without parental involvement. (See also FTC press release here.)

According to the complaint filed in the U.S. District Court for the Eastern District of North Carolina, the company allegedly collected personal information from players under the age of 13 without first notifying parents or obtaining parents’ verifiable consent. Parents who requested that their children’s personal information be deleted allegedly had to take unreasonable measures, the FTC claimed, and the company sometimes failed to honor these requests. The company is also accused of violating the FTC Act’s prohibition against unfair practices when its settings enabled, by default, real-time voice and text chat communications for children and teens. These default settings, as well as a matching system that enabled children and teens to be matched with strangers to play the game, exposed players to threats, harassment, and psychologically traumatizing issues, the FTC maintained. While company employees expressed concerns about the default settings and players reported concerns, the FTC said that the company resisted turning off the default setting and made it difficult for players to figure out how to turn the voice chat off when the FTC did eventually take action.

Under the terms of a proposed court order filed by the DOJ, the company would be prohibited from enabling voice and text communications unless parents (of players under the age of 13) or teenage users (or their parents) provide affirmative consent through a privacy setting. The company would also be required to delete players’ information that was previously collected in violation of COPPA’s parental notice and consent requirements unless it obtains parental consent to retain such data or the player claims to be 13 or older through a neutral age gate. Additionally, the company must implement a comprehensive privacy program to address the identified violations, maintain default privacy settings, and obtain regular, independent audits. According to the DOJ’s announcement, the company has agreed to pay $275 million in civil penalties—the largest amount ever imposed for a COPPA violation.

With respect to the illegal dark patterns allegations, the FTC claimed that the company used a variety of dark patterns, such as “counterintuitive, inconsistent, and confusing button configuration[s],” designed to get players of all ages to make unintended in-game purchases. These tactics caused players to pay hundreds of millions of dollars in unauthorized charges, the FTC said, adding that the company also charged account holders for purchases without authorization. Players were able to purchase in-game content by pressing buttons without requiring any parental or card holder action or consent. Additionally, the company allegedly blocked access to purchased content for players who disputed unauthorized charges with their credit card companies, and threatened players with a lifetime ban if they disputed any future charges. Moreover, cancellation and refund features were purposefully obscured, the FTC asserted.

To resolve the unlawful billing practices, the proposed administrative order would require the company to pay $245 million in refunds to affected players. The company would also be prohibited from charging players using dark patterns or without obtaining their affirmative consent. Additionally, the order would bar the company from blocking players from accessing their accounts should they dispute unauthorized charges.

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