dotStrategy Co. v. Facebook Inc

Background

DotStrategy Co. operated the registry for the “.buzz” domain name and bought 55 advertising campaigns on Facebook between December 2013 and May 2018. Facebook charged dotStrategy about $8,000 in total. The campaigns used different billing methods, including cost-per-click, cost-per-action, cost-per-impression, and optimized cost-per-impression billing. Under impression-based billing, Facebook charged based on how many times an advertisement appeared, regardless of whether a user clicked it.

Before buying the advertisements, dotStrategy agreed to Facebook’s terms of service. Those terms prohibited fake or inauthentic accounts and stated that Facebook did not guarantee the number of clicks, could not control how clicks were generated, and was not responsible for click fraud or other potentially invalid activity.

On a Facebook advertiser-help page, Facebook stated that it reviewed suspicious or potentially invalid clicks and that advertisers would not be charged for clicks determined to be invalid. DotStrategy alleged that this statement meant Facebook would not charge for interactions with its advertisements by fake accounts and would refund charges after detecting and removing a fake account.

DotStrategy initially filed several Arkansas-law claims as a proposed class action. After the case was transferred to the Northern District of California, it abandoned those claims and pursued one claim under California Business and Professions Code section 17200, which prohibits unlawful, unfair, fraudulent, deceptive, untrue, or misleading business practices and advertising. The court had previously denied class certification.

Summary-judgment standard and claim

The court explained that summary judgment is required when the record shows no genuine dispute about a material fact and the moving party is entitled to judgment under the law. For dotStrategy’s claim based on allegedly misleading statements, it had to show both that Facebook’s statement was false or misleading under the reasonable-consumer test and that dotStrategy relied on the statement.

The court decided the falsity-or-deception issue and did not address reliance because it found no genuine dispute that the statement was false or misleading in this case.

Court’s analysis

The court held that a reasonable consumer would understand Facebook’s statement to mean what it said: if Facebook detected or received notice of suspicious or potentially invalid click activity, including clicks generated through fake accounts, it would conduct a manual review; if the review determined the clicks were invalid, Facebook would not charge for them. The court also found that the promise necessarily included a refund if Facebook had already charged for clicks before completing that review.

The record, however, did not show that Facebook charged dotStrategy for a click by a fake account. One campaign used cost-per-click billing and another used cost-per-action billing. The court found no evidence that either campaign involved a charge for a fake-account click, or that Facebook was alerted to suspicious fake-account clicks and failed to conduct a manual review. DotStrategy had not requested a manual review of those campaigns.

The remaining campaigns were not billed by the click. They were billed based on impressions, so the invalid-click statement did not apply. DotStrategy’s expert had identified charges “associated with” accounts later identified as fake, but the evidence showed those charges were for impressions rather than clicks. DotStrategy and its expert ultimately did not dispute that point.

The court rejected dotStrategy’s argument that the statement covered impression charges because dotStrategy had not agreed to show advertisements to fake accounts. Facebook had not represented that it would not charge for invalid impressions. The court stated that an argument that Facebook failed to provide what dotStrategy had bargained for would be a contract claim, not a claim for false or misleading business practices under section 17200.

The court also considered, but did not decide, whether dotStrategy lacked an adequate legal remedy, because the claim failed on the merits.

Other requests and disposition

DotStrategy asked the court to defer ruling so it could obtain updated information about fake accounts. The court denied that request, finding that dotStrategy had had ample notice of the issue, had chosen not to pursue further discovery on it, and had not shown a sufficient basis to delay the ruling.

DotStrategy also asked the court to take judicial notice of two Facebook webpages concerning fake accounts and account integrity. Facebook did not oppose the request. The court reviewed the webpages but found that they did not affect the outcome.

The court granted summary judgment for Facebook.