Wednesday, May 21, 2008

AdWords Daily Budget is actually monthly budget: false advertising claim proceeds

CLRB Hanson Industries, LLC v. Google Inc., 2008 WL 2079200 (N.D. Cal.)

This putative class action centers on AdWords. Google moved for partial summary judgment on its practice of charging AdWords customers up to 120% of their “Daily Budget,” when the average “Daily Budget” was never exceeded over the course of a month. Google’s statements about AdWords included:

(1) Customers can “[f]ully control [their] ad budget”;

(2) If an AdWords customer accrues clicks that would result in charges of more than 20 percent above a customer’s Daily Budget in a single day, the AdWords system provides an overdelivery credit;

(3) If an ad campaign accrues clicks that would result in charges exceeding more than the number of days in the month multiplied by the customer’s Daily Budget, the AdWords system provides an overdelivery credit at the end of the month.

The court had previously determined that the AdWords agreement was a valid contract. Though “Daily Budget” might imply a daily limit, Google makes clear that the daily budget is not the daily limit in a variety of ways. Daily Budget is the first definition in the AdWords Glossary, and it says:

On any single day, the AdWords system may deliver up to 20% more ads than your daily budget calls for. This helps make up for other days in which your daily budget is not reached. However, you’ll never be charged more than your average daily budget over the course of a month. For example: if your daily budget is $10 and the month has 30 days, you might be charged up to $12 on any single day but your monthly charges will never exceed $300.

Google’s FAQs said the same thing in several logical places. Any customer who investigated the meaning of “Daily Budget” would quickly figure it out. Google disclosed its practice of charging up to 120% of a “Daily Budget” in a way that was “equally as prominent and accessible” as its definition of “Daily Budget.” Thus, the 120% charge is not, in and of itself, a breach of contract, at least when done to make up a prior shortfall.

The court noted in a footnote, however, that it might be a breach of contract for Google to over-serve and charge 120% on one day and then “intentionally” under-serve and undercharge a customer on another day. Google explains the practice as a way of smoothing out uneven search demand across different days, so if it tinkers with the supply that might be a breach.

The court found that triable fact issues remained on whether Google breaches the AdWords contract for “(1) customers running short-term ad campaigns, for less than one month; (2) customers running longer ad campaigns, where the final month of their campaign is a partial month; and (3) customers who pause their campaigns.” There might be a breach if those customers were charged more than their Daily Budget multiplied by the number of days in the campaign. (The implication here is that, absent a change in the contract, Google can’t start off strong and count every delivery—Google only gets to count an overdelivery if there’s been a previous underdelivery.)

Plaintiff also brought California Unfair Competition Law claims based on Google’s practice of calculating charges using a monthly budget, while advertising a daily budget. The standard is whether a reasonable consumer would be misled, even if a statement is true. “A clearly disclosed term or practice is not likely to deceive a consumer,” though there may be unfair competition even without a breach of contract.

Google’s evidence of disclosure included a screen shot showing the “Specify your daily budget” screen from AdWords from “the 2002 period,” which clearly stated: “Your actual daily charges may fluctuate by 20% because of changing search volume, but the maximum you will spend in a 30-day calendar month should be no more than 30 times your daily budget.” But Google didn’t provide the exact dates, nor evidence that plaintiffs actually saw that signup page. Plaintiff’s representative testified that plaintiff first signed on to AdWords in 2002, and that Google’s practice wasn’t clear to it until it received emails in March 2005.

So, the question was whether a reasonable consumer would have been misled into suffering injury by being charged up to 120% of her Daily Budget on a single day. Plaintiffs’ evidence suggested that “Daily Budget” could reasonably be interpreted as a daily maximum. Google has said: “You have complete control over how long you participate in AdWords, and you control the maximum you want to spend per day”; “You have complete control over how much you spend and how you spend it. You choose the maximum cost-per-click (CPC) and the daily budget that fit your advertising goals”; “You also control your overall spending by setting a daily budget (how much you want to pay per day). ... If your daily budget is lower than the recommended amount, Google will deliver your ads evenly throughout the day to keep your clicks at or below your daily budget.” A reasonable consumer could have been misled into thinking that the Daily Budget was the maximum charge for any given day, unless Google’s practice would have been apparent to an ordinary consumer. Google didn’t have enough evidence that its disclosure was “so prominent that a reasonable consumer would necessarily view it. Instead, the disclosure is located well within the AdWords Agreement, a document over 100 pages long.”

There were also triable issues of fact on actual injury from relying on the alleged misrepresentation. One argument is that the system could result in “overexposure” on certain days, which could create difficulties in “meeting demand and maintainting customer satisfaction.” (Comment: Really? Do people run the same search so many times per day that they’d see the same ad and be “overexposed”? And the meeting demand/customer satisfaction argument may look good now, but if I were Google, I’d grab onto this as one reason why class treatment is inappropriate, since that’s absolutely the kind of individualized issue that courts like to use to deny certification.)

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