Facebook Caught Deliberately Tricking Kids Into Spending Their Parents’ Money

A federal judge ruled on Monday that a batch of previously hidden documents laying out how Facebook made money off of children must be made public.

The unprecedented release of internal company documents, which will arrive in the coming days, could bury the company in controversy on a scale of last year’s Cambridge Analytica data-harvesting scandal, which led to plunging share prices, lawsuits, and calls for a consumer boycott.

The documents from a 2012 class-action lawsuit, which are going public thanks to efforts by journalists at Reveal News from the Center of Investigative Reporting, reveal how Facebook deliberately misled children into paying hundreds if not thousands of dollars in game charges, and how the company failed to process refunds by unsuspecting parents. The documents also show how Facebook’s own employees voiced concerns about the long-running practice, only to be ignored by company management.

The case was sparked after a lead plaintiff agreed to allow their child to make a $20 payment in exchange for virtual currency while playing Ninja Saga on Facebook, only to begin accumulating massive charges that numbered into the hundreds within a few weeks. When Facebook failed to comply with the mother’s demands for a refund, the family filed a lawsuit in pursuit of their refund.

According to a previous ruling by U.S. District Court Judge Beth Freeman, the child “believed these purchases were being made with virtual currency, and that his mother’s credit card was not being charged for these purchases.”

In previous legal efforts by Reveal, the investigative journalism outfit uncovered documents that showed how children and parents failed to understand the opaque pay-as-you-go system while Facebook continued to drain their credit cards. When employees at the California-based company began raising concerns that people were effectively being hoodwinked, Facebook began analyzing demographic data for Angry Birds only to find that the average age of players was only five years old.

According to an internal Facebook memo:

“In nearly all cases the parents 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.”

The memo added that on other platforms such as Apple’s iPhone, continued payments required that people provide passwords or reauthorization. One employee expressed concern that children would be confused by in-game purchases requiring virtual currency because it doesn’t resemble “real money.”

In one particularly disturbing excerpt contained in an unsealed document published by Reveal, company employees flippantly discuss a pre-adolescent child they refer to as a “whale,” a term from the casino industry that refers to gamblers who squander massive amounts of money on bets. The child entered a credit card number to play the game and within two weeks, paid thousands of dollars in charges. The employees ultimately turned down her refund request.

Gillian: Would you refund this whale ticket? User is disputing ALL charges…

Michael: What’s the users total lifetime spend?

Gillian: It’s $6,545 – but card was just added on Sept. 2. They are disputing all of it I believe. That user looks underage as well. Well, maybe not under 13.

Michael: Is the user writing in a parent, or is this user a 13ish year old

Gillian: It’s a 13ish yr old. says its 15. looks a bit younger. she* not its. Lol.

Michael: … I wouldn’t refund

Gillian: Oh that’s fine. cool. agreed. just double checking

Court records also show that Facebook often never sent receipts for purchases, and attempts to dispute charges frequently led down the path to a dead end, or links that simply didn’t function.

In the past several years, online and smartphone gaming has become a lucrative enterprise for start-ups and developers, allowing for apps to be made for a few thousand dollars and ensuring, in many cases, a handsome return on investment.

In the case of so-called “Free-to-Play” (F2P) apps that allow players to speed-up progress by making in-game purchases, daily revenues raised by games can reach from the tens of thousands to over a million dollars. Industry-leading game Fortnite earns a daily revenue nearing $1.5 million, according to Think Gaming.

Facebook currently has a library of 6,000 Instant Games and a pool of 2.3 billion monthly active users, and has integrated its game-related functions with its desktop, mobile, and Messenger platforms.

In a 2010 article by industry magazine Gamasutra, Settlers Online game designer Teut Weidemann gave a glimpse into the mindsets of game developers, revealing an openly cynical approach to consumers. In the interview, the designer touted the seven biblical sins – vanity, envy, gluttony, lust, anger, greed, sloth – as a go-to guide for “monetizing all the weakness of people” while keeping them “addicted and make them keep playing.”

“Game design is not about game design anymore — now it’s about business,” Christopher Schmitz, a colleague of Weidemann, added. “We do exploit them, but they should not feel like they’re treated in a bad way.”

Well, it appears that Facebook may be paying for its shady business practice of exploiting and screwing over young gamers and their families.

Only time will tell to what extent the company’s potentially deliberate bilking of users will backfire.