FTC fines Fortnite maker Epic Games $520M over children’s privacy and item shop charges

The Federal Trade Commission (FTC) announced Monday morning it will charge Epic Games with a $520 million settlement over charges related to children’s privacy. Epic Games, which makes popular all-ages games like “Fortnite” and “Fall Guys,” allegedly violated the Children’s Online Privacy Protection Act (COPPA) by deploying “design tricks, known as dark patterns, to dupe millions of players into making unintentional purchases,” the FTC said in a press release.

The $520 million payment is divided into two settlements: The COPPA fine amounts to $275 million, which is the largest-ever penalty for violating an FTC rule. The FTC also fined Epic $245 million to refund customers for what it calls “dark patterns and billing practices.” Epic says it will pay both of these fines, the latter of which will be the FTC’s largest-ever refund amount in a gaming case.

“Statutes written decades ago don’t specify how gaming ecosystems should operate. The laws have not changed, but their application has evolved and long-standing industry practices are no longer enough,” Epic wrote in a statement. “We accepted this agreement because we want Epic to be at the forefront of consumer protection and provide the best experience for our players.”

Epic said that it has updated its payment flows to offer a yes or no option to save payment info, as well as instant purchase cancellations and self-service refunds.

In addition to making it too easy for children to make online purchases, the FTC also took issue with Epic’s live text and voice communication features, which were set to be turned on by default. The FTC claims that children were exposed to harassment and abuse because of these features, especially since Epic had no way of making sure that children and adults would not be matched together in online play. According to the FTC’s press release, children have been exposed to bullying, threats, harassment and “psychologically traumatizing issues such as suicide” while playing the game.

In Epic’s response to the FTC fine, the company pointed to a new feature it rolled out earlier this month called Cabined Accounts. If a player registers with a birth date that places them below their country’s age of digital consent (13 in the U.S.), then features like chat and purchasing are disabled. When a child signs up, their parent will be notified via email and can then adjust their child’s settings if they choose. Right now, this feature is available for “Fortnite,” “Fall Guys” and “Rocket League.”

In the last two years, Epic has raised more than $3 billion in venture capital, most recently at a $31.5 billion valuation. Along with Lego, whose parent company invested $1 billion, Epic is working on building a kid-friendly metaverse.

Epic has also been embroiled in a lawsuit with Apple, accusing the tech giant of anti-competitive behavior. The video game company challenged Apple’s policy that it can remove products from the iOS App Store if the app reroutes customers around paying within the app, which gives Apple a 30% cut.

Update, 12/19/22, 11:40 AM ET with comments from Epic.