Facebook is in trouble after encouraging “friendly fraud.” A new report reveals that the company had been turning a blind eye to accidental purchases for six years.
What is “friendly fraud”? Forbes describes:
In Facebook’s jargon, “Friendly Fraud” refers to people accidentally spending money on games. Sometimes it can be hard with mobile/Facebook games to tell when you’re spending real money. This is particularly true of minors, who may not realize their parents’ credit cards are tied to their accounts, or that in-game purchases are actual purchases to begin with.
Even as angry parents complained and employees questioned the practice, Facebook defrauded users of their money when accidental purchases were made – even when they were in the thousands.
It was so easy for kids to make purchases that chargeback rates for Facebook were as high as 9%. (For reference, the Federal Trade Commission considers 2% an indication of deceptive business practices.)
As companies like Apple and Google began to require passwords or credit card info before money was charged, Facebook temporarily began a similar practice, only to reverse it when revenues decreased significantly.
A Facebook employee stated:
In nearly all cases the parent knew their child was playing Angry Birds, but didn’t think the child would be allowed to buy anything without their password or authorization first (like in iOS.) If we were to build risk models to reduce it, we would most likely block good TPV (Total Purchase Value.)
Although Facebook finally changed the policy in 2016, they are now facing a class-action lawsuit for the practice.