Epic Games settled a lawsuit with the Federal Trade Commission (FTC) on Monday in which the games developer will pay $520 million for violating children’s privacy and tricking consumers into making purchases on Fortnite.
The suit, comprising two complaints, claims that Epic collected personal data from children under 13 years of age on Fortnite without parental consent, violating the federal Children’s Online Privacy Protection Act, for which it will pay a $275 million settlement.
Epic will also pay an additional $245 million in consumer funds for tricking consumers into making purchases by using “dark patterns,” which trap players into buying things that are difficult to cancel.
The suit comes just over a week after the FTC sued to block Microsoft’s proposed $65 billion acquisition of Activision Blizzard, sending a strong signal that regulators are more aggressively pursuing big technology firms.
For marketers, growing regulation could throw a spanner in investment strategies. Advertisers must balance reaching a lucrative young audience on platforms like Fortnite, Roblox and TikTok, with staying on the right side of the law.
Campaign US asked the experts:
How might the FTC's fine against Epic impact advertiser strategies on platforms where children are likely to be spending time?
Lewis Smithingham, SVP of innovation, Media.Monks
I don’t think the FTC fine against Epic will have much impact on advertiser strategies. Brands looking to advertise specifically to children should look to platforms specifically designed for kids — ones that are COPPA compliant.
For example, Epic Games is partnering with Lego to build a safe and positive space for kids to play in the metaverse. It’s important to note that in the contemporary era of fandom, traditional norms around age often don’t apply. Have you seen the trailer for the new Barbie movies? Increasingly, IP is designed to engage fans — fans in general.
Liz Cole, executive director, U.S. head of social, VMLY&R:
In a way, child privacy litigation and legislation is only the tip of a larger iceberg related to online privacy for all online platform users. The regulations vary geographically, but since these platforms operate globally, advertisers should be prepared to comply with the strictest of any set of requirements that apply. In many cases this will mean forgoing advanced targeting and personalization in favor of advertising that is relevant to pop culture or subcultures as opposed to individuals.
Brian Yamada, chief innovation officer, VMLY&R:
The fine is massive and it’s a fantastic reminder for brands to go beyond the marketing opportunities and be very aware of the context of the platforms they are entering. I don’t know that this will dampen enthusiasm for emerging platforms, but hopefully will increase understanding. And it’s a great wake up call to examine their own data collection and management approaches to ensure they are compliant and consumer-first in design.
Jamie Gutfreund, CMO, Whalar:
The Internet was not designed for kids. But, as the world struggles with the long-term impact of social media on adults, it’s a reminder (but no surprise) that kids require special consideration.
Marketing to children requires specialized expertise, which is unlikely to exist as an internal capability. Brands must partner with dedicated experts or create a chief children’s privacy officer role to manage the requirements.
Epic has simultaneously settled with the FTC and raised the bar for children’s privacy. Marketing to children in unique and creative ways is possible and effective, and the brands that go above and beyond compliance will win the hearts and minds of kids and families worldwide.
Arielle Garcia, chief privacy officer, UM:
This fine is the latest in a slew of enforcement actions related to privacy and online safety of children and teens. A similarly large $405 million penalty issued to Instagram by the Irish Data Protection Commission in September also emphasized the importance of age-appropriate experience design and inclusive privacy-by-default.
While we have seen several changes by platforms intended to bridge these gaps and expand protections for teens, this fine underscores the growing sentiment from lawmakers and regulators that COPPA’s “child-directed” and “actual knowledge” scope is too narrow to sufficiently protect younger users.
We also see the FTC underscore its growing attention to dark patterns — manipulative experience design — a parallel concern to those discussed by the Commission in relation to “stealth advertising” and the lesser capacity of younger individuals [to] distinguish content from paid advertising, particularly in relation to influencers.
It is clear that bolstering protections for children and teen safety and privacy is and will remain an international legislative priority, and in the U.S., is a key bipartisan focus. Advertisers should evaluate their media strategy with these developments in mind, considering the audience composition for their own properties and products, particularly when using partner pixels or otherwise enabling data to be collected and shared. Further, advertisers should understand how media partners, including platforms and mobile apps, are adapting their practices to mitigate inappropriate data collection and enable age-appropriate content and advertising – beyond their “actual knowledge” of children users.