Facebook found a way to stop kids overspending in games, then deliberately didn’t use it

The social network encouraged developers to allow minors to overspend in their games, in a practice it nicknamed "friendly fraud"

Despite recognising the issue of children spending large amounts of their parents’ money, Facebook’s internal documents – released earlier this week – show that the social network developed systems to prevent minors from overspending, which it then actively decided to ignore.

The internal documents were released as a result of a class action lawsuit against Facebook, as reported by Reveal from the Centre of Investigative Reporting (via GamesIndustry.biz). They show that between 2010 and 2014, several internal messages state that the social network’s staff acknowledged the issue of overspending, came up with a solution to prevent it, and then decided not to use it.

The 135 pages of documents also state that Facebook directly targeted children in order to grow its games business, and actively encouraged developers to allow children to spend money without the permission of their parents, a practice employees referred to as “friendly fraud.” An internal study showed that children spent $3.6 million (£2.75 million) on Facebook browser games in just four months between October 2010 and January 2011.

Refund requests issued by parents were often denied, leading to money being claimed back in vast quantities through credit card chargebacks. More than 9% of all money earned from children was recouped in this way, in comparison to an average rate of approximately 0.5% for other business. The Federal Trade Commision cites a chargeback rate of around 2% as cause for concern when assessing deceptive business practices.

Developers were encouraged to offer free virtual items to parents who complained, which were thought to be better than refunds because they “bear no cost.”

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After testing a method of verification that would have required children to enter the first six digits of a credit card number in order to make purchases, Facebook found that the number of refund and chargeback requests decreased. However, instead of rolling out this practice across the social network, the company decided to focusing on “maximising revenue” rather than limiting friendly fraud.

In a statement to Reveal, the social network said that “Facebook works with parents and experts to offer tools for families navigating Facebook and the web,” and that “we routinely examine our own practices.” In 2016, this lead to an update to the social network’s terms and conditions that would provide “dedicated resources for refund requests relation to purchases made by minors on Facebook.”