CARY – Epic Games will pay $520 million to settle children’s privacy as well as shopping issues related to its global hit title Fortnite to the Federal Trade Commission in a settlement announced early Monday. The FTC described Epic’s actions as “unlawful.”

The settlement was described as “record breaking” by federal regulators in a case involving children’s privacy as covered in the Children’s Online Protection Act. Facebook’s $5 billion FTC privacy/data protection settlement in 2019 is by far the largest overall settlement.

Despite the size of the settlement, Epic says it will continue building a new headquarters in Cary.

The FTC had alleged that Fortnite violated children’s privacy law and had to refund “unwanted charges” for purchases.

Regarding privacy, the FTC said the fine was the “largest penalty ever obtained for violating an FTC rule.”

“Epic will pay a $275 million penalty for violating children’s privacy law, change default privacy settings, and pay $245 million in refunds for tricking users into making unwanted charges,” the FTC said.

“The FTC alleged in two separate complaints that North Carolina-based Epic engaged in several unlawful practices,” it added.

Epic: Cary HQ plans proceed despite record $520M FTC fine over Fortnite

FTC: $520M settlement with Epic Games is ‘gift of privacy for Fortnite players’

‘Epic put children and teens at risk’

But the penalties don’t stop there.

“Additionally, in a first-of-its-kind provision, Epic will be required to adopt strong privacy default settings for children and teens, ensuring that voice and text communications are turned off by default,” the FTC announced.

“Epic put children and teens at risk through its lax privacy practices, and cost consumers millions in illegal charges through its use of dark patterns,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, in a statement. “Under the proposed orders announced today, the company will be required to change its default settings, return millions to consumers, and pay a record-breaking penalty for its privacy abuses.”

FTC’s complaints in detail: Privacy violations and illegal ‘dark patterns’

In a statement, Epic acknowledged the agreement and fines.

“No developer creates a game with the intention of ending up here. The video game industry is a place of fast-moving innovation, where player expectations are high and new ideas are paramount. Statutes written decades ago don’t specify how gaming ecosystems should operate,” Epic said. “The laws have not changed, but their application has evolved and long-standing industry practices are no longer enough. We accepted this agreement because we want Epic to be at the forefront of consumer protection and provide the best experience for our players.

“Over the past few years, we’ve been making changes to ensure our ecosystem meets the expectations of our players and regulators, which we hope will be a helpful guide for others in our industry.”

Read the full FTC statement online:

Epic is latest tech firm to tangle with FTC over privacy and lose millions