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


According to the documents, this was a common practice across the site, known as "friendly fraud". The judge ordered the social network to provide refunds at parents' request.

The memos and other records show that "the company orchestrated a multi-year effort that duped children who played video games into spending their parents' money", according to Reveal.

In one document, an employee at Facebook discussed how the company could use the "data to choose apps that would be good recipients for an automatic underage inflow ... apps that come to mind: PetVille, Happy Aquarium, Wild Ones, Barn Buddy and any Ninja game".

According to internal documents, a team of Facebook employees set out to solve the issue and eventually devised a system that would require players to re-enter some credit card information to verify that the spending was intentional and permitted by the credit card owner.

The documents released Thursday night are part of a 2012 lawsuit against the company, which alleges that Facebook knew kids were making the purchases and made it hard for parents to get their money back, CBS News reported.

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In a resulting study looking to explain the high refund rate, Facebook found that 93 percent of those refunds were due to parents not knowing the game was charging their credit card, largely because parents "didn't think the child would be allowed to buy anything without their password or authorization first".

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. But the company didn't adopt them for fear of undercutting the revenue growth that helps boost the company's stock price - and its employees' compensation. One 15-year-old spent $6,500 (£4,950) in two weeks. Her charges ballooned to almost $1000 total. "I said, 'show me what you are doing, ' so there was a little stack of coins and it would get low and it would blink at him and he would hit it and it would go brrrring and the coins would shoot up again", Bohannan said. Another employee mentioned that only 50 percent of Facebook users were receiving email receipts. Despite its recognition of the problem, internal discussions show that Facebook decided it would be best to fight refund requests and allow the problem to persist. In 2016, Facebook made a decision to settle the case, paying two families $US5000 ($7044) and agreeing to change its practices.

Facebook told Fox News that it was contacted by the Center for Investigative Reporting past 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. Instead, Facebook says it has offered refunds and changed its practices.

"We have now released additional documents as instructed by the court", a company spokesperson wrote in an emailed statement.

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