Jakub Porzycki/NurPhoto via AP
The Federal Trade Commission recently announced an agreement under which Epic Games will be required to pay more than half a billion dollars over how it has run Fortnite.
The video game Fortnite is one of the most successful entertainment products in history, with something like 400 million registered users, and $9 billion in revenue for its owner Epic Games in just 2018 and 2019. But that success has a dark side. The Federal Trade Commission recently announced an agreement under which Epic will be required to pay more than half a billion dollars over how it has run Fortnite—by allegedly violating the privacy rights of children, including exposing them to adult predators, and tricking its customers with deceptive “dark patterns” billing practices.
It’s a powerful demonstration of the fact that private corporations can’t be trusted to not abuse their customers. If child exploitation or trickery juice a company’s bottom line, they can be relied on to do it, and only the government can stop them.
For those who don’t know, Fortnite is a cartoony first-person shooter that is “free-to-play,” meaning there are no charges for making a character or joining a game. Its most popular mode is called “Battle Royale” (named after a classic Japanese horror film), in which 99 players compete to be the last one standing in an arena that gradually shrinks as time passes. Epic makes its money by charging for cosmetic stuff: clothes, character skins, dances, poses, and so on, as well as selling toys and merchandise. It keeps people playing by regularly updating the game map and mechanics and adding new cosmetics, which keeps it fresh.
Epic has been criticized for years for creating a culture in which kids feel obligated to buy so they aren’t stuck with an uncool default avatar, exploiting the fear of missing out with time-limited items, and similar pressure tactics.
What the FTC alleges, however, is much worse. The complaint—which got unanimous support from both Republican and Democratic commissioners—alleges that Epic intentionally collected personal information on young children without parental consent, in violation of the Children's Online Privacy Protection Act (COPPA) as implemented by the agency. Fortnite is blatantly marketed to children, yet Epic did not require parental consent before collecting data on under-13s, and even “required parents who requested that their children’s personal information be deleted to jump through unreasonable hoops, and sometimes failed to honor such requests,” the FTC alleges.
Worse still, Epic enabled voice chat by default in Fortnite, despite knowing that both adults and children play the game, and despite internal protests from employees that this was a dangerous practice. “Children and teens have been bullied, threatened, harassed, and exposed to dangerous and psychologically traumatizing issues such as suicide while on Fortnite,” said the FTC statement. Republican Commissioner Christine S. Wilson submitted a blistering concurring statement with three specific examples of pedophiles (who were subsequently convicted) sexually abusing children they met on the game.
Epic has agreed to pay a fine of $275 million for this behavior. The Department of Justice has submitted the agreement to a federal judge for sign-off, which is likely just a formality given that Epic has already agreed.
If child exploitation or trickery juice a company’s bottom line, they can be relied on to do it.
The other part of the agreement, which does not go before a judge and includes fines totaling $245 million, is for Epic allegedly tricking people into buying Fortnite items. The FTC alleges that its “counterintuitive, inconsistent, and confusing button configuration led players to incur unwanted charges,” such as “by pressing an adjacent button while attempting simply to preview an item.” Up until 2018, it allowed children to buy items with their parent’s credit card without getting consent first. And the agency alleges that if players disputed charges, the company often retaliated by locking their account, thus causing them to lose access to all their prior purchases. Moreover, even “when Epic agreed to unlock an account, consumers were warned that they could be banned for life if they disputed any future charges.”
Most of this behavior came when Fortnite was still on the Apple Store; it was removed during protracted litigation with Epic about Apple’s extortionate fees. At the time, Apple took 30 percent of all the proceeds of in-app purchases. What liability Apple has for benefiting from that take and failing to protect is users could be the next question the FTC needs to ask.
Epic has promised to implement a number of changes so as to not run afoul of the FTC again. That is all to the good. But if this agreement is any indication, the video game industry could stand more serious regulation. Even this enormous fine barely touches the billions Epic has made on Fortnite over the years, and will continue to make even if it scrupulously adheres to the changes it has promised.
The reason is that, as industry analyses show, it is very easy to make tons of money with this kind of micropayment model by hooking a tiny minority of players (called “whales” in the business) with poor impulse control. It would be worth considering regulations to discourage this kind of inherently abusive business model, perhaps with rules requiring regular disclosure to players of how much they’ve spent, or required warning pop-ups for big spenders, or banning micropayments entirely.
It’s good that COPPA is such a powerful law that it can prevent predatory online conduct that targets children, and it’s great to have an FTC that actually enforces the law. But adults play Fortnite too, and are also susceptible to individual manipulation. The combination of broader legislation and federal regulators signaling that the law matters can really put a dent in Epic’s behavior.
Doing so would have salutary cultural effects as well. By all accounts, Fortnite is a very fun game to play. But fundamentally, it is digital fast food: a flashy, instant-gratification experience with carefully designed hooks to keep you coming back and spending big.
It’s not a coincidence that true works of art like Return of the Obra Dinn, Spec Ops: The Line, Outer Wilds, and Valiant Hearts: The Great War are sold as one-time purchases, instead of as endless, deliberately addicting grind-a-thons that try to colonize as much of your free time as possible. The video game equivalent of the McChicken has its place, but the massive success of Fortnite has already inspired other companies to attempt imitations. It’s easy to imagine a near future in which that is the only kind of game major publishers put out, and that would be a tragedy.
