Documents Show Facebook Knowingly Took Money From Unwitting Children

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 decided to do nothing because it would slow down revenue.

The documents stem from a class action lawsuit and were first reported on by investigative news site Reveal. Looking through over 135 pages including internal Facebook memos from 2010 through 2014, Reveal's reporting shows that the company actively chose not to help parents in either stopping their children's spending on misleading purchases or getting their money back.

The problem starts with games like Rovio's Angry Birds, Zynga's PetVille, and Emagist Entertainment's Ninja Saga. These games are free to download but come packed with opportunities to spend actual money to advance further. These cash payments are meant to look like items within the game, and its easy for a child to not realize what they're doing.

It's a business model that's been known for years—in 2015, actor Jack Black went on The Tonight Show and said his son had spent $3,000 on such purchases. Other documents showthat some children spent $6,500 on in-game purchases.

The documents show that Facebook took a light tone internally with these purchases, referring to the children in casino-speak as high-spending "whales" and their purchases as "friendly fraud." Parents' complaints would fall on deaf ears at the social media giant, forcing them to go through agencies like the Better Business Bureau or even inferring pricey chargeback fees from credit card companies to get some of their money back.

In 2011, a Facebook employee named Tara Stewart began exploring how to prevent these fees. “It doesn’t necessarily look like ‘real’ money to a minor,” she noted.

According to court documents, Stewart and her team deciding on the idea of requiring a credit card present for each purchase—the buyer would have to enter the first six digits of their card before the sale was complete. The system appeared to work, with parents requests for refunds and chargebacks dropping. Calling the system a good "first step," Stewart noted that it "forces the minor to prove he is in possession of the credit card.”

But Stewart's investigation also showed that this system could cost Facebook revenue. An earlier internal study showed that in a three month time period, Oct. 12, 2010 to Jan. 12, 2011, children had spent $3.6 million on these games. Stewart's system was not implemented.

Reveal's reporting,  discusses in-depth how these companies hid these purchases from children and parents alike, only to find them on the next phone bill. This continued until a lawsuit settlement in 2016.

"Facebook works with parents and experts to offer tools for families navigating Facebook and the web," the company said in a statement. "As part of that work, we routinely examine our own practices, and in 2016 agreed to update our terms and provide dedicated resources for refund requests related to purchased made by minors on Facebook.”