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

Facebook used games to make millions off children in 'friendly fraud'

Facebook accused of tricking children into spending thousands playing online games

Sometimes, kids were unaware they were even spending real money, according to an internal report by Facebook itself.

A trove of internal documents have revealed how Facebook was concerned children were spending large amounts on in-app payments without parents' permission - but seemingly chose not to act. In part, the suit alleges, this was because Facebook allowed developers to obscure the transactions in which a credit card would be charged. "For years, it allowed for what it called "friendly fraud" because it feared implementing protections would harm revenue, according to the documents", tech website Gizmodo reported.

The class-action lawsuit centers 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".

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Facebook released the "friendly fraud" documents just as the Wall Street Journal was publishing an op-ed piece by Zuckerberg defending the company's integrity and business principles. Facebook settled the lawsuit in 2016; a U.S. District Court judge ordered the documents unsealed on January 14.

"We were contacted by the Center for Investigative Reporting a year ago, 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". Between 2008 and 2014, kids under 18 years old spent more than $34 million in purchases. She claimed that neither she nor the boy knew that they were spending money on the game.

One risk analyst at the company, Tara Stewart, said that in-game currency "doesn't necessarily look like real money to a minor".

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A 1 percent "chargeback" rate is considered high, Reveal News reported, and the Federal Trade Commission considers a 2 percent chargeback rate a "red flag" for deceptive business practices.

The case, Bohannan and others v Facebook Inc, continues. It's not clear if parents in the rest of the world are still getting stiffed by Facebook's policies.

It's a troubling affair, but one that game developers should pay close attention to as the conversation about ethical monetization, especially when children are involved, isn't likely to wind down at any point in the future.

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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 U.S. minors". "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". Instead, it said the company has offered refunds and changed its practices.

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