March 16, 2015
A Federal judge has said that a class of plaintiffs, numbering in the hundreds of thousands, may proceed with their claims in a lawsuit seeking to change the manner in which Facebook handles online transactions by minors. The trial is scheduled to begin on October 19, 2015.
The suit seeks to have Facebook provide refunds for purchases of “Facebook Credits” made by minors with their parents’ debit or credit cards, without parental consent. Facebook Credits, which have since been discontinued and replaced by Facebook Payments, allow the social media company’s users to purchase items within Facebook games and apps. Facebook has thus far refused to issue any refunds for the minors’ purchases, relying on its “all sales are final” policy, which the plaintiffs contend violates California Law. It is estimated that full refunds would ultimately cost Facebook in excess of $5 million.
While Facebook maintains its belief that the claims are without merit and intends to vigorously fight the charges, it is not the only technology giant to find itself in the crosshairs of angry parents and federal authorities. Apple, for $32.5 million, and Google, for $19 million, have both recently settled with the Federal Trade Commission (“FTC”) in connection with claims regarding the ability of children to make in-app purchases without parental permission. Last summer, the FTC sued Amazon, also in connection with in-app charges made by children.
Be Cautious of Minors’ Purchases and Privacy When Developing and Marketing Applications
This suit is yet another reminder that companies must take extra precautions when the possibility exists for minors to interact with their respective websites, applications and/or products. We have previously written about the special care that companies must take to provide privacy to minors due to the adoption of, and subsequent amendments to, the Children’s Online Privacy Protection Act (“COPPA”). While this Facebook class action suit does not allege COPPA violations, it is nevertheless indicative of the fact that class action plaintiffs, state attorneys general, and the FTC, continue to show increasing vigilance in their efforts to prosecute claims against companies for alleged violations of children’s privacy rights and perceived improprieties in interacting with minors on the Internet and on mobile platforms.
Internet and mobile applications and games, like those over which Facebook currently finds itself in hot water, have been accused of being highly addictive, designed to be addictive, and having a tendency to compel children playing them to make large in-app purchases of “game currency,” which often amount to hundreds of dollars per purchase. As the above examples indicate, without taking the proper precautions, technology companies invite potentially enormous financial liability when their games and applications are used by children. Therefore, it is critical for companies with an Internet and/or mobile presence to seek the advice of experienced counsel in connection with the development and marketing of their respective applications. It is equally critical to engage knowledgeable counsel in connection with crafting their information collection, use and sharing practices.
If you are interested in learning more about this topic or need to review your application development and marketing practices, please email us at info@kleinmoynihan.com, or call us at (212) 246-0900.
The material contained herein is provided for information purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.
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