Microsoft has been hit with a potential class-action lawsuit for allegedly overcharging marketers for pay-per-click ads.
The lawsuit, filed in federal court in Seattle on Wednesday by Lane's Gifts and Collectibles, stems from ads that Microsoft allegedly served on "parked domain" and "errors" pages. Web users tend to reach those sites by accident, after mistyping the addresses of sites they intend to visit.
Lane's Gifts says in its complaint that it agreed to pay up to 30 cents per click when the company appeared in search results, which are displayed to users based on their queries. But the company says it agreed to a maximum of just 5 cents per click when ads appear in sites within the "content network" -- where Microsoft serves ads that match keywords in a page's content.
Lane's Gifts alleges that it was charged the higher search-results price for ads that were served on parked domains and error pages. The company says it should have been charged the content-network rate for those ads. Lane's Gifts also alleges that Microsoft misreported content-network ads as search ads.
Lane's Gifts is seeking to represent a class of all search marketers who were "charged an amount higher than the advertiser's maximum bid."
The Texarkana, Ark.-based marketer doesn't say how much money it believes it lost, due to alleged overcharging. Lawyers for the company didn't respond to telephone calls by Online Media Daily.
A Microsoft spokesperson said: "We became aware of this complaint
yesterday and look forward to examining the claims.”
This lawsuit isn't Lane's Gifts first battle with a search engine. The company also brought a class-action case against Google for click fraud. That matter settled for $90 million in 2006.
Since then, Web companies have won some favorable rulings in lawsuits about pay-per-click ads. Earlier this year, a federal judge ruled that search marketers couldn't proceed as a class in a lawsuit against Google stemming from its parked domains and errors program. In that case, U.S. District Court Judge Edward Davila ruled that the marketers' claims required individualized assessments.
Likewise, Facebook recently defeated a bid for class-action status in a lawsuit by pay-per-click marketers who allege they were overcharged. The marketers in that case recently asked the 9th Circuit for permission to appeal.
Marketers that are denied class-action status can still pursue individual litigation, but the costs of doing so often are prohibitive.