Tuesday, June 06, 2017

Click fraud claim against Google fails

Singh v. Google Inc., 2017 WL 2404986, No. 16-cv-03734 (N.D. Cal. Jun. 2, 2017)

Singh alleged that Google falsely induced small businesses to participate in AdWords, resulting in payment for invalid clicks. Singh alleged: (1) breach of the implied covenant of good faith and fair dealing; (2) violations the UCL; (3) violations of the FAL; and (4) fraud in the inducement. The court granted Google’s motion to dismiss.

Because advertisers are charged by the click, Google maintains policies and practices to prevent click fraud, and the Google Ad Traffic Quality Resource Center states that “advertisers are not charged for [invalid] clicks or impressions.” Singh challenged Google’s representations that click fraud occurred infrequently and that Google had robust systems in place to effectively filter out the “vast majority” of invalid clicks and prevent customers for being charged for those clicks.

The contractual claim failed.  Google acknowledges the existence of click fraud and the possibility that an advertiser would be charged for fraudulent clicks. Singh argued that the implied covenant covered frustration of purpose, and that his expectations were informed by the false and misleading representations in Google’s public postings. But Singh didn’t explain how the extra-contractual statements can provide the basis for a claim for breach of the implied covenant, particularly where, as here, the contract contained an integration clause.

UCL, FAL, fraudulent inducement: A UCL claim can’t rest on a claim for breach of the implied covenant of good faith and fair dealing.  Unfairness: “An act or practice is unfair if the consumer injury [1] is substantial, [2] is not outweighed by any countervailing benefit to consumers or to competition, and [3] is not an injury the consumers themselves could reasonably have avoided.” This is a balancing test; a practice will be found unfair “when it offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.”  Singh alleged that Google misrepresented the likelihood that customers would actually incur charges for a significant volume of invalid clicks by assuring them that (1) such clicks represent a small percentage of all clicks; (2) that Google filters out the “vast majority” of all such clicks; and (3) customers would only pay when interested individuals click on their ad. But Google disclosed the risk of click fraud in its contract and elsewhere, and provided a process allowing advertisers to be compensated for charges related to invalid clicks.

Perhaps most significantly, Singh didn’t plausibly plead that Google misrepresented the likelihood that customers would actually incur charges for a significant volume of invalid clicks. Singh’s conclusory allegations that the claims process provided by Google to deal with invalid clicks was illusory was insufficient.  The court applied Rule 9(b)’s heightened pleading requirements for fraud to Singh’s challenges to the following claims:

• “[I]nvalid [or fraudulent] clicks account for less than 10% of all clicks on AdWords ads.”
• “When Google determines that clicks are invalid, we try to automatically filter them from your reports and payments so that you’re not charged for those clicks.”
• “Advertisers rely on the relevance of our ad placement, our reporting statistics, and the quality of the clicks their ads receive. Publishers in turn count on advertiser participation, relevant ads which create a good experience for users, and an accurate and reliable source of income which contributes to the success of their websites and business. We take this trust seriously and we know that the Google advertising networks couldn’t exist without it.”
• “[Google has] a global team which is dedicated to staying on top of your concerns, monitoring traffic across Google’s ad network, and preventing advertisers from paying for invalid traffic.”
• “The vast majority of all invalid clicks on AdWords ads are caught by our online filters. These filters are constantly being updated and react to a wide variety of traffic patterns and indications of click fraud attacks.”
• Investigations prompted by customer inquiries are “relatively rare” and such investigations identify invalid clicks representing less than .02% of all clicks.
• “[C]harges are solely based on Google’s measurements for the applicable Program, unless otherwise agreed to in writing.”

Singh needed to explain his allegations that these statements were fraudulent.  He relied on an “experiment” he conducted, as well as a 2013 article in the Atlantic. Singh alleged that he created four advertisements, in two pairs, one of which was a “Standard Ad” and the other an “Experimental Ad” that was gibberish. He asserted that no person would have clicked on the Experimental Ads, and therefore extrapolated that all clicks on the Experimental Ads were fraudulent or invalid; comparing that to the Standard Ads, he concluded that 35-50% of all clicks on AdWords ads were fraudulent. The experiment was “utterly implausible and would not be admissible in any form.”  Nor could Singh use the Atlantic article to bolster his claims. The article allegedly states that 60 percent of all Internet traffic is the result of bots, many of which consist of software that provides false ad views. Among other things, the article undermined Singh’s allegations that he was not aware of the possibility that the rate of click fraud might be high; as to falsity, “neither the experiment nor the magazine article says anything about the efficacy of Google’s filters.” Nor did Singh adequately allege that he was ever charged for invalid clicks. 

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