advertiser class certified in case about Meta's overclaiming of "Potential Reach" of ads

DZ Reserve v. Meta Platforms, Inc., 2022 WL 912890, No. 3:18-cv-04978-JD (N.D. Cal. Mar. 29, 2022)

The court certified a class of United States residents who paid Meta for placement of advertisements on social media platforms based on Meta’s allegedly inflated claims of ad reach resulting in artificially high prices, resulting in claims for fraudulent misrepresentation and fraudulent concealment (for damages) and under the UCL for injunctive relief.

Meta’s Ads Manager displays a “Potential Reach” for an ad after advertisers select their targeting and placement criteria; the default for people in the United States aged 18 and up was over 200 million people, revised as demographic targeting criteria are selected. “Meta describes the Potential Reach as an estimate of people in the ad’s target audience.”

Typicality: Meta argued that the proposed class included a diverse population of advertisers ranging from “ ‘large sophisticated corporations’ to ‘individuals and small businesses,’ ” meaning that the named plaintiffs, as advertisers on the smaller end of the spectrum, couldn’t fairly or adequately represent them. The court disagreed. Typicality is demonstrated when “the claims or defenses of the representative parties are typical of the claims or defenses of the class.” Plaintiffs had evidence that, regardless of size or buying power, Meta’s customers saw similar representations by Meta about its advertising reach and programs. Advertisers were shown the same default Potential Reach of over 200 million people before they applied any targeting criteria, and plaintiffs’ expert testified that advertising customers were shown Potential Reach estimates that were inflated by a similar percentage. Differing advertising budgets and scope of purchases didn’t defeat typicality or adequacy.

Nor could Meta successfully recast its typicality and adequacy challenges as questions of reliance and UCL standing is equally unavailing. “[P]laintiffs demonstrated reliance by proffering evidence that DZ Reserve was deterred from using Meta ads after learning that the Potential Reach was an inaccurate metric;” plaintiffs indicated that “they would have spent less on ads after learning the Potential Reach was inaccurate, demonstrating that they were deceived into spending more money.” This was enough for reliance for UCL standing purposes.

Nor did an arbitration provision in contracts for advertising after May 2018 defeat adequacy and typicality. The case was filed in August 2018, but Meta never sought to compel arbitration, and might have waived it; anyway, the named plaintiffs purchased ads before and after May 2018, making them adequate for both situations.

Commonality/predominance: The main liability issues were common to the class members and are capable of resolution with common evidence. Fraudulent concealment and fraudulent misrepresentation claims require: “(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e. to induce reliance; (d) justifiable reliance; and (e) resulting damage.” For plaintiffs’ UCL claims (which don’t offer monetary relief), plaintiffs must show that members of the public were likely to be deceived. The main liability question was misleadingness. Meta’s challenges to the merits didn’t make class treatment inappropriate; to the extent that merits scrutiny was warranted, plaintiffs showed that all class members were exposed to a similar representation about the ability of Potential Reach to reach “people,” namely unique individuals. And plaintiffs showed that Meta’s Potential Reach metric was not actually an estimate of people reached, but an estimate of “accounts” reached.

Meta argued that the Potential Reach numbers were not uniformly inaccurate as a result of different targeting criteria producing different Potential Reach numbers. “Even so, Potential Reach was always expressed as a number of ‘people,’ and the discrepancy between people and accounts made the number inaccurate, even if the numerical value of the inaccuracy varied across advertisers.” Whether Meta made misrepresentations to all class members was subject to common proof, as was Meta’s knowledge of the misleading statements, and intent to deceive. There were documents indicating Meta’s knowledge of the inaccuracy, and Meta also knew “that the potential reach number was the most important number in its ads creation interface and that advertisers frequently relied on the estimated audience to build their budgets and advertising strategies.”

Likwise for materiality and reliance. “[A] presumption, or at least an inference, of reliance arises wherever there is a showing that a misrepresentation was material,” and materiality “can be proved through evidence common to the class.” All advertisers in the class saw Potential Reach metrics, and a “majority” of advertisers rely on Potential Reach as a metric for their advertisements. Proof of injury was also susceptible to common proof. Plaintiffs’ expert concluded that it was a statistical certainty that, for any advertisement with a Potential Reach of at least 1,000 people or more, the estimate would be significantly inflated above the actual number of people the advertisement could reach, even though the amount of inflation might vary. Plaintiffs also offered experts who calculated a price premium, and the court declined to exclude plaintiff’s expert who performed a relevant conjoint analysis.

Superiority: obviously, since the price premium at issue here for each advertiser was no more than $32.

What about a Rule 23(b)(2) class for the UCL injunctive relief claim? Such a class may be certified when “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” Plaintiffs sought an order directing Meta to “either (a) correct the [Potential Reach] metric by removing known sources of inflation, or (b) remove the [Potential Reach] metric altogether.” They had standing to seek this remedy because “[k]nowledge that the advertisement or label was false in the past does not equate to knowledge that it will remain false in the future.” Plaintiffs testified that they would consider purchasing ads from Meta again if Meta corrected or removed the misleading Potential Reach metric. Meta argued that plaintiffs did not show they face a threat of actual future harm because at least one inflation source has already been remediated and Meta updated disclosures about multiple accounts. That was a merits question, as were Meta’s objections to the scope of the requested injunction so plaintiffs got a a Rule 23(b)(2) class for their UCL claims.