Facebook faces lawsuit over kids' online purchases

The social network will have to contend with a class-action lawsuit over its refusal to provide refunds when children spend money on the site without the permission of their parents.

Facebook is up against a class-action lawsuit over kids making purchases without parental permission. CNET

Facebook will find itself in court later this year defending itself against a lawsuit over children spending their parents' money.

On Tuesday, US District Judge Beth Labson Freeman in San Jose, Calif., ruled that the company must face a nationwide class-action lawsuit that aims to force it to provide refunds when kids spend money on the site without their parents' permission, Reuters said Wednesday. Estimated to number in the hundreds of thousands, the plaintiffs contend that Facebook violated California law by citing its "all sales are final" policy in denying the refunds.

This issue of children buying stuff online without the permission of their parents is a dicey one that has cost other tech companies a fair amount of money.

In January 2014, Apple was forced to refund at least $32.5 million in a settlement with the Federal Trade Commission over the ability of children to make in-app purchases without parental consent. Last September, Google was ordered to shell out $19 million in refunds over the same issue, while in July, the FTC sued Amazon over unauthorized in-app charges made by children. Given the outcome of these past cases, Facebook is likely to face a tough challenge in court and may end up having to settle the suit and refund the purchases.

The lawsuit contends that the company allowed children to use their parents' credit cards to buy Facebook Credits, a virtual currency that has since been retired in favor of Facebook Payments. Facebook argued against class action status for the suit by saying that the individual claims were too different. But the judge didn't buy that argument.

"Though some minors undoubtedly may wish to continue making purchases through credit or debit cards they do not have permission to use, such a desire cannot prevent the named plaintiffs from bringing suit to demand that Facebook's policies comply with the law," Judge Freeman wrote in her ruling, according to Reuters.

Even as the suit, which was initiated in April 2012, moves ahead using class action status, Freeman ruled that any refunds would be doled out on a case-by-case basis rather than to the group of plaintiffs as a whole. A trial date is set for October 19.

A Facebook spokesman sent CNET this statement: "The court correctly found that it would be inappropriate to permit plaintiffs to seek refunds on behalf of the proposed class. We believe the remaining claims about our policy are without merit and we will continue to defend ourselves vigorously."

Updated at 9:00 a.m. PT with a statement from Facebook.

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