Meta is asking an appellate court to overturn a ruling granting class-action status to a lawsuit claiming Facebook inflated advertising numbers.
The company filed papers on Friday with the 9th Circuit Court of Appeals for permission to immediately appeal a decision by U.S. District Court Judge James Donato granting class-action status to the plaintiffs, DZ Reserve and Max Martialis.
Donato ruled on March 29th that the companies could proceed with claims on behalf of U.S. advertisers who used Facebook’s Ad Manager or Power Editor to purchase ads on Facebook or Instagram after August 15, 2014.
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Meta says that, left unchanged, the class would total more than 3 million advertisers. In court papers the company argues Donato’s decision is not in line with other decisions about class actions: “That conflict is of exceptional importance, because class actions brought by online advertisers are a fast-growing category of putative class claims, and often involve millions of class members, seeking billions of dollars in damages.”
In his decision, Donato rejected the company’s argument that the class was too diverse, because it included “large sophisticated corporations” as well as individuals and small businesses. The judge said it made sense for individuals to sue as a group because “no reasonable person” would sue Meta on their own to recover at most a $32 price premium.
Meta’s filing indicates that it may settle the case if its appeal is not granted, as the plaintiffs are asking for over $7 billion in class-wide damages: “Claimed damages in that amount almost never proceed to trial before a jury,” adding that the possibility of a nine-figure verdict creates “inexorable settlement pressure.”
The suit, originally filed in August 2018, claims Facebook induced advertisers to purchase more ads — and pay higher prices for them — by inflating the number of users who might see the ads. It pointed to a report by the Video Advertising Bureau, which said in 2017 Facebook’s estimates of audience reach in every U.S. state were higher than the states’ populations. The suit was later amended to include the allegation that Facebook employees had been aware of complaints about the metric since 2015.
Meta’s court papers claim estimates about the potential reach of campaigns aren’t guarantees, and don’t have an impact on billing.
Why we care. Facebook is the biggest fish when it comes to social media in the U.S. Audience size is one of the foundational metrics for determining ad prices. While other media have third-party certification of these numbers (Nielsen, Audit Bureau of Circulation, etc.), there is no such cerification for Facebook. Given that, lawsuits like this seem all but inevitable.
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About The Author
Constantine von Hoffman is managing editor of MarTech. A veteran journalist, Con has covered business, finance, marketing and tech for CBSNews.com, Brandweek, CMO, and Inc. He has been city editor of the Boston Herald, news producer at NPR, and has written for Harvard Business Review, Boston Magazine, Sierra, and many other publications. He has also been a professional stand-up comedian, given talks at anime and gaming conventions on everything from My Neighbor Totoro to the history of dice and boardgames, and is author of the magical realist novel John Henry the Revelator. He lives in Boston with his wife, Jennifer, and either too many or too few dogs.
