Epic Games has just been slapped with an eye-popping, record-breaking settlement from the FTC that means the end of a pair of civil complaints against the Fortnite publisher.
Epic must pay $520 million based on a pair of issues that were raised in the complaints.
First, the company allegedly violated the Children’s Online Privacy Protection Act (COPPA) by collecting personal information of players under 13 without notifying their parents or obtaining their consent. They also supposedly illegally enabled real-time voice and text chat for kids and teens by default, leading to kids who were “bullied, threatened, harassed and exposed to dangerous and psychologically traumatizing issues such as suicide.”
And that’s only the first half, $275 million for the COPPA violations, which Epic “didn’t admit or deny” as part of the settlement.
The other part of this is $245 million in consumer refunds for using tactics that trapped customers into paying for in-game items and throwing up barriers to canceling those purchases. Epic allegedly deployed “counterintuitive, inconsistent and confusing button configurations” which led to hundreds of millions of dollars in accidental purchases and subsequent unauthorized charges, and then made canceling and refunding those orders incredibly difficult. Epic even locked customer accounts who disputed the charges with their credit card companies, and threatened them with lifetime bans if they disputed charges multiple times.
In addition to paying all this money, Epic now must:
- Make significant changes to its purchase systems to prevent this from happening again.
- Establish a privacy program to address the COPPA issues.
- Obtain independent audits.
- Offer refunds to customers who believe they were unfairly charged for in-game items set up through the FTC, though it may take months to process those refunds.
While this settlement is huge, it is big enough to make a significant dent in Epic Games or its future ambitions? Likely not. Epic’s market cap was last estimated to be $32 billion, and it took in $5.7 billion in revenue in 2021. So this settlement would be 10% of that. Annoying, but at their scale, likely not all that damaging. Fortnite alone brings in anywhere from $3.5 to $5.8 billion in revenue by itself, depending on the year.
Still, this may have larger ramifications for Epic down the road. A company that’s settled for this much for issues this serious may have trouble when it comes to their other prospects, like their constant fight against Apple’s App Store, where they claim the company is stifling metaverse growth with its high fees. Epic got Fortnite banned from the App Store trying to circumvent those, but has lost most of its early challenges trying to prove Apple has a monopoly in the space.
Fortnite itself still soldiers on as a huge force in the industry, recently launching Chapter 4 and a new map, along with a fresh range of crossovers that include The Witcher and My Hero Academia. Hopefully they’ve learned their lessons and will abide by all these rules in the future.
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