Facebook profited from kids through 'friendly fraud', memo says

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The social media giant targeted kids in an aggressive effort to pump up revenue from games like Angry Birds, PetVille and Ninja Saga, Reveal reported Thursday, citing court documents from a 2012 class action lawsuit.

Staff at Facebook created a method that would have reduced the friendly-fraud problem on the platform, but the company did not implement it.

According to newly unsealed court documents, Facebook's was aware of children blindly throwing away their parent's money on Facehook-connected games, thought of a solution, but then chose to do nothing because it would slow down revenue.

"In almost 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 authorisation first", read one memo, written by Facebook employee Danny Stein. The social network also allegedly ignored employees' warnings that it was tricking underage users who didn't realize credit cards were linked the Facebook accounts. Employees suggested giving money back, but leaders did not respond to those suggestions. Facebook said it released documents after being instructed by the court, having already voluntarily unsealed documents following a request from the Center for Investigative Reporting. The story detailed the case of one 12-year-old boy who had spent almost $1,000 in the game Ninja Saga.

While the documents are old, they shed light on Facebook's past business practices as the company continues to be under vast scrutiny for its numerous privacy breaches.

Facebook's policy was apparently to encourage game developers to allow such spending in order to increase revenues - a practice referred to internally as "friendly fraud".

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After taking a look at the issue, a Facebook employee concluded that around 93 per cent "of the refunds are being made due to friendly fraud refund requests". "The documents come from 2010-2014 and demonstrate that Facebook was well aware of kids were playing simple games like Angry Birds and purchasing virtual items without their parents' knowledge".

To parents who complained about surprisingly huge credit-card bills after their children built up big game expenses, Facebook had this to say, in so many words: "Forget it".

RevealNews says this lawsuit was settled by Facebook in 2016. The document does not make clear whether Facebook ever enacted this program.

In 2011, a Facebook risk analyst flagged the issue, concluding that children things within games using their parents' payment information - stored by the company after an initial purchase - didn't know what they were doing, Gizmodo reported.

As part of the settlement of the 2016 case, Facebook said it works with parents and experts to provide tools for families.