SAN FRANCISCO, CA, February 21, 2019 – Earlier today, Common Sense Media, Campaign for a Commercial-Free Childhood, Center for Digital Democracy, and over a dozen organizations called upon the Federal Trade Commission (FTC) to investigate whether Facebook has engaged in unfair or deceptive practices in violation of Section 5 of the Federal Trade Commission Act and the Children’s Online Privacy Protection Act (COPPA).
“Facebook’s practice of ‘friendly fraud’ and referring to kids as ‘whales’ shows an ongoing pattern of the company putting profits over people. Kids, under any circumstances, should not be the target of irresponsible and unethical marketing tactics,” said Jim Steyer, CEO of Common Sense Media. “Facebook has a moral obligation to change its culture toward practices that foster the well-being of kids and families, and the FTC should ensure Facebook is acting responsibly.”
The FTC complaint is in response to unsealed documents from a 2012 class action lawsuit that Facebook settled in 2016. Upon a Freedom of Information Act request filed by the Center for Investigative Reporting, internal documents at Facebook revealed the company knowingly duped children into making in-game purchases and made refunds almost impossible to obtain. Facebook employees called the practice “friendly fraud” and referred to kids who spent large amounts of money as “whales,” a casino-industry term for super high rollers.
Advocates are concerned that Facebook employed unfair practices by charging children for purchases made without parental consent and often without parental awareness. According to Section 5 of the Federal Trade Commission Act, “unfair” practices are defined as those that “cause or [are] likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition” (15 U.S.C. Sec. 45(n)). Advocates point to court documents to demonstrate substantial injury to consumers, including one teenager who incurred $6,500 of charges in just a few weeks, and request rates for refunds were 20 times higher than the usual rate of refund requests.
“Facebook’s scamming of children is not only unethical and reprehensible – it’s likely a violation of consumer protection laws,” said Josh Golin, Executive Director of Campaign for Commercial-Free Childhood. “Time and time again, we see that Facebook plays by its own rules regardless of the cost to children, families and society. We urge the FTC to hold Facebook accountable.”
Additionally, the complaint asks the FTC to investigate whether Facebook violated COPPA. Unsealed documents show that Facebook was aware that many of the games it offered were popular with children under age 13 and were in fact being played by children under 13. COPPA makes it unlawful for an “operator of a Web site or online service directed to children, or any operator that has actual knowledge that it is collecting or maintaining personal information from a child, to collect personal information from a child” unless it has obtained verifiable parental consent and provided appropriate disclosures.
Advocates are calling for the Commission to recognize the particular vulnerability of young people and investigate whether Facebook is complying with Section 5 and COPPA.
Groups signing on to the complaint include Common Sense Media, Center for Digital Democracy, Campaign for a Commercial-Free Childhood, Consumer Action, Electronic Privacy Information Center, Consumer Federation of America, Children and Screens, Badass Teachers Association, Inc., Media Education Foundation, New Dream, Parents Television Council, Peace Educators Allied for Children Everywhere (P.E.A.C.E.), Parent Coalition for Student Privacy, Public Citizen, Story of Stuff, TRUCE, and Defending the Early Years.
The full complaint can be read here.