Experts Say Facebook, Zynga Have Defense To 'Scam' Ads Lawsuit
A California resident has sued gaming developer Zynga and social networking site Facebook for allegedly profiting from "highly misleading" ads placed within games. But some legal experts say that the case might not get very far because federal law immunizes Web companies from liability for material they didn't create.
The potential class-action lawsuit, filed last week in federal court in the northern district of California, alleges that ads in Zynga games tricked users by purporting to offer them "free" trial subscriptions, but then preventing people from canceling or obtaining refunds.
"Most, if not all, of the online advertisements presented through Zynga are scams," the lawsuit alleges. "The advertisements are highly misleading and often result in users subscribing to goods or services that they do not want or need."
Zynga recently drew scrutiny for allegedly displaying questionable ads in its games after TechCrunch posted a series of articles about the company. Zynga offers games like "Mafia Wars," "Vampires" and "YoVille" as free apps on Facebook and other sites.
Earlier this month, TechCrunch posted a video of Zynga CEO Mark Pincus admitting that he "did every horrible thing in the book" to grow revenues. "I mean, we gave our users poker chips if they downloaded this zwinky toolbar, which was like -- I don't know, I downloaded it once and couldn't get rid of it," he said at a presentation this spring.
The consumer who is suing, Santa Cruz resident Rebecca Swift, alleges that she lost about $200 as a result of misleading ads. She says that in June, while playing Zynga's YoVille, she allegedly signed up for a "risk-free" trial of monthly shipments of a green tea supplement in order to earn YoCash -- virtual currency used in the game.
While the ads said that consumers could cancel within 15 days, Swift alleges that the company refused to honor her request to cancel, ultimately resulting in $165 in charges to her debit card. On another occasion this year, she responded to an ad for YoCash by entering her cell phone number, which allegedly resulted in her being billed for about $30 without her consent.
But despite the public relations problem posed by the allegations, and the Pincus video, legal experts say that both Zynga and Facebook appear to have a defense because neither company is alleged to have created the ads.
The federal Communications Decency Act says that interactive services providers like Facebook and Zynga aren't liable when outside parties create or post unlawful content. Courts have said that principle holds true even when Web companies profit from the unlawful material.
"It strikes me as a clean kill for both Facebook and Zynga," says Rebecca Tushnet, a law professor at Georgetown and expert in legal matters related to false advertising. But, she says, the situation would be different if Facebook or Zynga themselves made untrue representations to consumers.
David Johnson, a digital media law expert, adds that "merely getting fees from a third party that publishes illegal or harmful material" doesn't destroy a company's immunity.
Eric Goldman, director of the High Tech Law Institute at Santa Clara, agrees that Facebook has an obvious defense under the federal statute. He adds that Zynga also can argue that it's immune from liability -- provided that it was just publishing other companies' ads and not also making its own statements about the advertisers.
Last year a federal district court judge in San Jose dismissed a lawsuit against Google for allegedly displaying fraudulent ringtone ads. The judge ruled that the Communications Decency Act immunized Google from liability, even though the ads were created through the AdWords platform.
Zynga declined to comment on the lawsuit. But earlier this month, the company said it would stop running ads from companies that offered virtual goods to people who agreed to try "free" trial subscriptions.
Facebook said in a statement that it does not see any merit in the lawsuit and will fight it vigorously. "The ads in question appeared in third-party applications, were not from Facebook, and provided no benefit to Facebook," the company stated. Facebook also said it takes action against ad networks and developers who violate the company's principles and policies. In recent months, Facebook has banned four ad networks from the service.