Memos: Facebook Allowed ‘Friendly Fraud' To Profit From Kids

Facebook allowed children to rack up huge bills on digital games while the company rejected recommendations for addressing what it dubbed “friendly fraud,” according to newly released court documents.

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The internal Facebook memos and other records were unsealed to comply with a judge’s order in a federal court case settled in 2016.

The lawsuit, filed in San Jose, California, centered on allegations that Facebook knowingly milked teenagers by permitting them to spend hundreds of dollars buying additional features on games such as “Angry Birds” and “Barn Buddy” without their parents’ consent.

The documents show Facebook considered measures to reduce the chances of kids running up charges on parents’ credit cards without their knowledge. But the company didn’t adopt them for fear of undercutting the revenue growth that helps boost the company’s stock price — and its employees’ compensation.

The internal debate about how to address the recurring problem of kids spending big bucks behind their parents’ backs occurred from 2010 and 2014 — a period that included Facebook’s stock market debut in 2012. After going public at $38 per share, Facebook’s stock plummeted by 50 percent, intensifying the pressure on CEO Mark Zuckerberg and his management team to bring in more revenue.