Memos: Facebook allowed 'friendly fraud' to profit from kids

Facebook used games to make millions off children in 'friendly fraud'

Facebook was bombarded with complaints that minors spent large sums of money playing games like Angry Birds and Ninja Saga on Facebook, while having no idea they were blowing "real" cash, internal emails show.

Facebook has been accused of not caring if game companies diddled children and their parents out of millions of dollars with in-game purchases, following the unsealing of United States court documents. For years, it allowed for what it called "friendly fraud" because it feared implementing protections would harm revenue, according to the documents.

Documents related to the case were placed under seal because Facebook successfully argued that releasing them to the public could harm its business.

To understand just how bad the problem was, one child mentioned in the papers made $6,500 in in-game purchases on his parents' credit card in just two weeks.

Facebook knowingly made millions of pounds from children as young as five using their parents' credit cards, referring to the transactions as "friendly fraud", according to court papers. One internal study of the issue concluded, "In almost all cases the parent knew their child was playing Angry Birds, but didn't think the child would be allowed to buy anything without their password or authorization first (like in iOS)".

Through surveys, Facebook reportedly learned that children were not aware they were spending "real" money.

In a three-month period between 2010 and 2011, more than 9% of money made from children through online games was recovered by credit card companies. Her charges ballooned to almost $1000 total. The company made a decision to refuse a refund request from the teenager's parents.

Rovio, the makers of Angry Birds, also noticed that refund requests from Facebook purchases were unusually high and wrote to Facebook expressing concerns.

"If we were to build risk models to reduce it, we would most likely block good [total purchase value]", said one Facebook employee in the unsealed documents. Facebook employees knew this. Bohannan's case was settled in 2016.

"They've changed some of their practices but initially when they went into buying and selling things on Facebook, they didn't have proper, safe practices".

Facebook told Fox News that it was contacted by the Center for Investigative Reporting previous year and voluntarily unsealed documents related to a 2012 case about the company's refund policies for in-app purchases that parents believe were made in error by their minor children. The class action case was settled by Facebook in 2016, agreeing "to dedicate an internal queue to refund requests for in-app purchases". "Facebook works with parents and experts to offer tools for families navigating Facebook", a spokesperson said.

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