In re Google Adwords Litig., 2012 WL 28068 (N.D. Cal.)
Plaintiffs alleged false advertising of Google AdWords and
sought class certification under California law.
The AdWords network includes parked domains (part of AdSense
for domains, AFD) and error pages (AdSense for errors, AFE). The ads display as a result of Google’s
attempts to match ads with the terms users entered to arrive at a particular
page. Plaintiffs alleged that Google
failed to disclose that, whether they chose to advertise in Google’s Search or
Content networks, Google would place their ads on parked domains or error
pages, and that Google was aware of the negative reputation of such
domains/pages and deliberately concealed its involvement with those sites. Indeed, Google allegedly published misleading
AdSense policies which prohibited publishers from putting ads on pages lacking
content, and obscured the URLs of AFD and AFE sites on Google's Placement
Performance Reports so that advertisers could not see the actual sites upon
which Google had placed their ads.
Google argued that plaintiffs mistakenly presumed that every
ad on any parked domain or error page was worthless and harmful, whereas advertisers
reaped demonstrable benefits from such ads (even if they had a negative
perception of such ads). Google also
contended that its disclosures were fine, and that advertisers could exclude
their ads from entire categories of web pages, including parked domains and
error pages.
Plaintiffs moved to strike declarations by three Google
employees because they were offering inadmissible expert testimony. The court largely agreed with Google that
these were lay witnesses testifying to the personal, particularized knowledge
they had by virtue of their positions in the business, and thus their testimony
was not problematic under Rule 701. They
provided key information about how AdWords pricing worked and about how many
advertisers opted out of placing their ads on parked domains and error pages. (Interestingly, the court used the term “behaves”
to describe AdWords, suggesting a level of complexity and even agency beyond that
of ordinary pricing systems; STS folks take note.) To the extent that they opined on the merits,
such as the viability of classwide restitution, the court disregarded their
testimony.
Plaintiffs moved to certify a class of customers who were
charged for clicks on ads placed on parked domains or error pages.
First, the court addressed standing. Named plaintiffs have to show actual reliance
under the UCL and FAL. This can be done
by showing that the defendant's misrepresentation or nondisclosure was an
immediate cause of the plaintiff's injury-producing conduct. For omissions, a plaintiff may show that, in
the absence of the omission, the plaintiff in all reasonable probability wouldn’t
have engaged in the injury-producing conduct.
An inference of reliance arises when a misrepresentation was material.
The named plaintiff alleged that it viewed the parked domain
and error pages as low quality sites upon which it didn’t want to advertise,
and that Google knew that plaintiff was likely to regard Google’s placement of
ads on such pages as important. Plaintiff
further alleged that Google’s omissions led it to buy ads it otherwise wouldn’t
have bought and to overpay for clicks on ads on such pages. These allegations were sufficient to
establish reliance. Plaintiff also
satisfied Article III with the same allegations, which indicated that it had
lost money or property by buying ads it wouldn’t have wanted had it known the
full truth.
Google argued that, even in UCL cases, absent class members
needed Article III standing, and thus a fact-intensive individualized inquiry
into injury was required for each member.
Since California provides relief under the UCL and FAL without
individualized proof of deception, reliance, or injury, and since the governing
objective test requires a plaintiff only “show that members of the public are
likely to be deceived” by a defendant's representations about its product, no
such fact-intensive inquiry was required.
If the class representative has Article III standing, no further
analysis of unnamed class members need be undertaken. (And anyway Article III was satisfied:
consumers who bought AdWords were relieved of money in the transactions.)
Plaintiffs sought 23(b)(3) certification, which requires
predominance of common questions of law or fact.
Google argued that the class wasn’t ascertainable, because
there was no systematic way to exclude advertisers who benefited from ads on
parked domains/error pages; most advertisers didn’t use Google’s tool to
calculate conversion rates so there’s no classwide method to determine the
benefits they received from ads on such pages, and anyway conversion rates
alone might not be a satisfactory measure of overall benefits from such ads. Given the class definition, the court saw
this as an issue regarding entitlement to restitution, not ascertainability.
Numerosity wasn’t a problem.
On commonality, plaintiffs argued that whether Google's alleged
omissions were misleading to a reasonable AdWords customer was capable of classwide
resolution, while Google contended that whether advertisers were entitled to
restitution wasn’t. The court found both
questions central to the litigation.
Though the second might generate individual answers, there was still a
valid common question. Plaintiffs’
claims were also sufficiently typical, and there was no evidence of conflicts
of interest with proposed class members.
However, plaintiffs flunked predominance because questions
of restitution would require individual inquiries. (The court specifically rejected Google’s
argument that individual questions of reliance and materiality also existed,
because of the UCL/FAL reasonable consumer test.) Though damages variations alone can’t defeat
certification, the facts here were special.
AdWords uses an auction that means that each advertiser paid a separate
amount per ad and per click, dependent also on the other bidders. “These
intricacies make it more difficult to calculate what AdWords customers would
have paid ‘but for’ the alleged misstatements or omissions.” Thus, a reduction in demand for advertising
on AdWords wouldn’t necessarily lead to a lower price for all advertisers.
Moreover, advertisers have “widely varying goals,” making it
difficult to calculate the value of what they received. Conversion to purchase is one way of
measuring performance, but in 2009 only a small percentage of active AdWords
accounts opted into conversion tracking, and even for them that might not be
the only measure of value.
Restitution need not be determined with exact precision, but
it must be based on a specific measurable amount supported by substantial
evidence. With these parties and facts,
the court wasn’t convinced that restitution could be reliably measured using
common methods. A full refund, for
example, wouldn’t take into account benefits received, given that some
advertisers actively sought to have their ads placed on parked domains and
error pages. A uniform discount for all
such ads would also ignore that individual advertisers’ ads might outperform
the same ads placed on other types of pages, as was the case for one named
plaintiff. Individual benefits from ads
would need to be accounted for in any restitution calculation. “Where, as here, proof of restitution due
each class member cannot be proved with relative ease, the court finds good
reason to deny class certification.”
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