PageRage, a company that allows users to customize Facebook pages by adding designs to the margins, has sued the social networking service for allegedly violating antitrust laws in an effort to keep PageRage off the site.
Sambreel Holdings, which develops the browser plug-in PageRage, says in a complaint filed this week in U.S. District Court in the Southern District of California that Facebook organized an advertiser boycott aimed at removing PageRage's ad-supported skins from the social networking service. Facebook also allegedly demanded that users remove PageRage skins from their profile pages, according to the lawsuit.
Sambreel argues that Facebook's alleged efforts to influence PageRage's business partners, as well as the alleged demands that users remove PageRage, violated federal and state antitrust laws.
Facebook did not respond to Online Media Daily's request for comment, but it appears likely to argue that its policies prohibit companies from advertising on skins like those created by PageRage. "Ad injection methods are unauthorized and violate the Statement of Rights and Responsibilities and Advertising Guidelines," Facebook allegedly said in an email to a company that worked with Sambreel. That email was forwarded to Sambreel and included in its court papers.
PageRage allows users to skin pages by layering other art elements -- including their own photos -- over the margins of Facebook profiles. The company also serves ads to users while they are on Facebook. In some cases, those ads make the ads sold by Facebook appear lower on the page, according to a report last December in The Wall Street Journal.
Sambreel says in its court papers that PageRage, which launched four years ago, grew to the point that it was taking in more than $1 million a month by 2010. By last year, PageRage drew more than 4 million users a day and was serving a significant number of ad impressions -- 89 billion in the second quarter alone, according to the lawsuit.
Sambreel argues that its growing presence on the site threatened Facebook's ad revenue, which prompted the social networking service to demand that companies stop advertising on PageRage's Facebook skins. "Between July and November 2011, Facebook approached Sambreel's advertising partners and presented them with a stark choice: deal either with Facebook and the entities that operate applications on Facebook or with PageRage," Sambreel alleges in court papers. "Given Facebook's sheer size and the reach of its application developers, a number of Sambreel's most important advertising partners agreed to cease purchasing advertising space."
Advertisers allegedly fled in response to Facebook's demands. The company says its largest advertisers -- accounting for 80% of ad revenue -- severed relations. "As a result, the rates for advertising on PageRage fell by more than 50%, as demand for PageRage ad impressions plummeted," the company says in court papers. The company says it has had to lay off more than 120 people this year.
Sambreel is seeking monetary damages and a court order prohibiting Facebook from enforcing policies that prohibit advertisers from using services like PageRage, and prohibiting Facebook from requiring users to remove PageRage.
Facebook hasn't yet responded to Sambreel's court papers, but the social networking service outlined a number of complaints against PageRage in a Dec. 5 cease-and-desist letter, which Sambreel included in its court papers. Among others, Facebook says that PageRage is "designed to deceive Facebook users into downloading a browser plugin that exposes them to security risks, prompts unsolicited commercial messages, hijacks Facebook users' accounts to run automated scripts without their knowledge, collects users’ information without authorization, unfairly trades on Facebook's intellectual property rights and tortiously interferes with Facebook's interests."
The letter says that PageRage slows down the load time and "creates banner ads that cover and obscure Facebook functionality -- e.g., the Facebook chat boxes and buddy lists." Facebook also says in the letter that ads on PageRage will confuse users and harm Facebook's brand "by both increasing the amount of advertising and materially changing the nature of the advertising presented."