DotStrategy Co. v. Facebook Inc., No. C 20-00170 WHA, 2020 WL 6591366 (N.D. Cal. Nov. 11, 2020)
The court grants plaintiff’s motion for leave to amend its
complaint in this putative class action alleging that FB’s statements about advertising
on FB violated the UCL. “The main issue presented here is whether or not a
reasonable advertiser would understand Facebook’s representation that it would
not charge advertisers for ‘clicks that are determined to be invalid’ to mean
that Facebook would not charge — or refund — advertisers for clicks made by
fake accounts, if at all, which Facebook identifies and removes from its
platform for violating its authenticity policies.” Plaintiff pled sufficient
facts to support this theory.
FB’s agreement said:
When serving your ad, we use best
efforts to deliver the ads to the audience you specify or to achieve the
outcome you select, though we cannot guarantee in every instance that your ad
will reach its intended target or achieve the outcome you select[.]
We do not guarantee the reach or
performance that your ads will receive, such as the number of people who will
see your ads or the number of clicks your ads will get.
* * *
We cannot control how clicks are
generated on your ads. We have systems that attempt to detect and filter
certain click activity, but we are not responsible for click fraud,
technological issues, or other potentially invalid click activity that may
affect the cost of running ads.
However, from 2013 through the present, FB’s Business Help
Center page represented that advertisers would “not be charged for clicks that
are determined to be invalid”: “If we detect or are alerted to suspicious or
potentially invalid click activity, a manual review is performed to determine
the nature of the activity. You will not be charged for clicks that are determined
to be invalid.” Facebook defines “invalid clicks” as “[c]licks from people that
do not indicate a genuine interest in the ad or show signs of ad testing. This
includes repetitive or accidental clicks or visits from the Facebook corporate
network” and “[c]licks generated through prohibited means, such as fake
accounts, bots, scrapers, browser add-ons or other methods that don’t follow
Facebook’s Terms.” FB’s terms of service and authenticity policy requires users
to use their “real identities,” so fake accounts violate Facebook’s policies.
The proposed complaint had a bunch of other FB statements
that were allegedly false and misleading, such as:
• “On Facebook, you’ll only pay to reach the right people
who’ll love your business.”
• “Facebook is a community where everyone uses the name they
go by in everyday life. This makes it so that you always know who you’re
connecting with.”
Nonetheless, FB allegedly charged for invalid clicks, which
includes “[c]licks generated through prohibited means, such as fake accounts,
bots, scrapers, browser add-ons or other methods that don’t follow Facebook
Terms.” When Facebook determined those clicks were generated through prohibited
means, it failed to provide a refund to plaintiff and the class members. Plaintiff
alleged that it reasonably believed that, because Facebook requires “everyone
to provide their real names,” it would not be charged for advertising that
interacted with fake accounts.
Plaintiff alleged that between 2013 and 2018, Facebook
charged it for clicks that were made by thirteen different fake accounts. Facebook
allegedly has since deleted eight of these thirteen accounts from its platform
“likely for violations of its ‘authenticity policy.’ ”
FB argued that no reasonable consumer could have been misled
by its allegedly false and/or misleading statements, particularly, in light of
the contractual disclaimers in the self-serve ad terms. The key issue was whether,
given FB’s statements, a reasonable advertiser would have believed that once
Facebook determines and removes an account for violating its authenticity
policies (e.g., a fake account), FB would then perform an audit to refund
advertisers for any invalid clicks that that account may have made, and for
which FB had charged advertisers for.
That is a question of fact not suitable for resolution on a
motion to dismiss. Plaintiff plausibly alleged deceptiveness to a reasonable
consumer.
The allegedly contradictory TOS stating that Facebook is not
“responsible for click fraud” was ambiguous; a reasonable advertiser could
construe that to mean that FB itself is not perpetuating any click fraud [and,
I’d add, couldn’t itself be held liable for damages—but that doesn’t mean it’s
clearly promising to hang on to the money it collected from the advertiser for
fraudulent clicks]. And the Ninth Circuit “has recognized that a UCL fraud
claim can be based on misleading representations in a solicitation even when
the plaintiff later signed a contract with provisions contradicting the earlier
falsehoods.” “The question, then, is not whether [Facebook’s] contractual terms
corrected the false statements in its advertising, but whether dotStrategy’s
reliance on the false advertising was reasonable even in light of the
contractual disclaimers.” That was properly alleged.
FB argued that none of its statements mentioned refunds, so
they couldn’t be deceptive. “But a refund is implied” for interactions FB knew
involved invalid clicks. FB tried to distinguish fake accounts from invalid
clicks, arguing that it only promised to provide manual review for “suspicious
or potentially invalid click activity,” and no charges for “clicks that are
determined to be invalid,” not audits every time a fake account was removed.
But the proposed complaint specifically alleged that
Facebook charged it and other advertisers for invalid clicks, such as clicks by
fake accounts and/or bots. “Second, a reasonable advertiser might also
reasonably believe that once Facebook determines an account is fake, Facebook
would be ‘alerted to suspicious or potentially invalid click activity’ and thus
would conduct a ‘manual review’ to determine the nature of the activity.” After
all, falsity/misleadingness “is analyzed from the perspective of a reasonable
consumer, not from the perspective of an attorney splitting hairs.”
This interpretation would not, as FB claimed, make it liable
if its platform was 100% secure against fake accounts. Rather, the advertiser’s
argument was that, once FB does stumble on fake accounts, it should then perform
an audit to refund advertisers for any invalid clicks committed by such
accounts, given what it said to advertisers.
FB then argued that, just because an account was fake in
2018 when plaintiff performed its survey, it doesn’t also follow that that
account was also fake in 2017, for example, when it clicked or engaged with
plaintiff’s ads. That was a factual issue, and the plausibility of the claims
was bolstered by various news reports suggesting that fake accounts on FB “are
rather ubiquitous.”
However, a number of the challenged statements hadn’t been
sufficiently pled to be false or even non-puffery:
• “Connect with people. Ads help
you reach the right people.”
• “Facebook can help you reach all
the people who matter most to your business.”
• “Facebook ads are optimized to
help you get more people to visit your website or increase conversion.”
• “Your business is for your
customers. Built relationships with them, reach new people and drive sales
using Facebook.”
• “Drive people to your website
with one click from the most engaging place on Facebook.”
• “Find new customers. Boost sales.
Facebook can help you meet your business goals.”
• “Meet the people who will love
your business.”
A reasonable consumer “would understand that not all users
on Facebook would adhere to Facebook’s authenticity policy or would be
interested in its ads.” And even people who didn’t use “true and full names”
might have provided accurate information concerning their age, gender, and
location, among other things; “it cannot be said that such an account is
categorically unable to be interested in plaintiff’s ads.”
But these statements were plausibly false/misleading:
• “On Facebook, you’ll only pay to
reach the right people who’ll love your business.”
• “Facebook is a community where
everyone uses the name they go by in everyday life. This makes it so that you
always know who you’re connecting with.”
And the plaintiff plausibly pled economic injury: the cost
of invalid clicks.
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