US imposes a fine of $520 million on Epic Games, creator of Fortnite, for alleged children’s privacy violation

Epic Games, the creators of Fortnite will have to pay $520 million to settle a case by the FTC that alleged Epic Games violated children’s personal information and tricked people into making purchases.

The fine will be imposed in two parts – the first is a penalty of $275m for violating children’s privacy laws. Epic will need to adopt strong default privacy settings for young people, the commission said on Monday.

Additionally, Epic Games will also pay $245m to refund consumers duped into making purchases they did not intend to make.

The FTC’s Chairwoman Lina Khan said in a statement that Epic used privacy-invasive default settings and deceptive interfaces that tricked Fortnite users, including teenagers and children.

Epic said in a statement on Monday that it had eliminated pay-to-win and pay-to-progress mechanics when two players compete against each other and eliminated random item loot boxes in 2019. It also said it was putting into place an explicit yes/no choice to save payment information.

Epic also announced that players could seek refunds via credit cards. “If a cardholder sees an unauthorized transaction on their statement, they may report it to their bank to have it reversed,” the company said in its statement.

Epic has also created features like easier-to-access parental controls and a PIN requirement to allow parents to authorize purchases and a daily spending limit for kids under 13.

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.

The FTC also said that several  Epic employees had expressed concerns about the company’s default settings in place for children, saying people should be required to opt-in for voice chats The commission said voice and text chat must be turned off by default.

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.