Lawsuit against FB over 'Potential Reach' metric inflation gains class action status

A lawsuit accusing Meta's Facebook of deceiving advertisers about its Potential Reach tool has been ruled as a class action. The decision, made by a US district judge in San Francisco, will allow the participation of potentially millions of individuals and small businesses that paid for ads on Facebook and Instagram since 15 August 2014, Reuters reported.  The lawsuit, which began in 2018, saw advertisers such as DZ Reserve accusing Facebook of inflating its advertising reach by increasing the number of potential viewers by up to 400%. According to the lawsuit seen by MARKETING-INTERACTIVE, advertisers had also allegedly purchased more advertisements from Facebook and paid a higher price for advertisements than they otherwise would have, due to Facebook inflating its potential reach. 

Facebook claimed in its 2017 annual report that it had 2.13 billion monthly active users globally then, with over 240 million monthly active users in the US alone, which then saw the platform earn about US$40 billion from advertising revenue that year. Documents produced by Facebook later confirmed that senior executives at the company knew for years that its Potential Reach metric was inflated - yet it failed to do anything, and even took steps to cover up the problem.

It was also revealed that in late 2017 and throughout 2018, Facebook executives repeatedly acknowledged that its metric was inflated and misleading due to, among other reasons, the fact that it includes duplicate and fake accounts.

US District Judge James Donato also rejected Facebook contention that the class was too diverse, which included large corporations, as well as individuals and small businesses, which would make it too hard to calculate damages. According to Reuters, Donato said that it made sense for the individual plaintiffs to sue as a group, as no reasonable party would sue Meta individually to recover at most a US$32 price premium.

Additionally, Meta also has plans to consolidate its Ad Topics and Interest Categories controls into a single Ad Topics control, which will cover a more extensive set of ad topics. Effective 11 April, users on Facebook and Instagram may use the control to set preferences across ad topics that reflect the interest targeting categories advertisers may use to reach them and the content they might see in an ad. 

This comes shortly after Meta removed its detailed targeting options on January 2022, which prevented advertisers from targeting users who have interacted with content related to health causes, sexual orientation, religious practices, political beliefs and social issues, among others. However, the rollout of the new Ad Topics control includes these topics as well, allowing advertisers to target users who have stated that they wish to receive such content in their preferences. 

Separately, in July last year, Facebook said it limited the options advertisers have to reach youths under 18. The tech giant said in a blog post that its social media platforms Facebook and Instagram "weren’t designed for people under the age of 13", and would default youths (under the age of 16 or 18, depending on the country) into private accounts when they sign up for an Instagram account. It also said that it would develop AI to find and remove those who are underaged, as well as new solutions to verify people's ages without collecting ID.

The company explained that youths "may not be well equipped" to make the decisions regarding the ads they want to see. The app will notify users about targeting options that advertisers can use to reach them and the tools provided to control their ad experience once they turn 18.

More recently, the Australian Competition and Consumer Commission (ACCC) has sued Meta for allegedly engaging in false, misleading or deceptive conduct by publishing scam advertisements featuring prominent Australian public figures on Facebook. ACCC alleged that this was in breach of the Australian Consumer Law or the Australian Securities and Investments Commission Act. Meta also allegedly aided and abetted, or was knowingly concerned, in false or misleading conduct and representations by the advertisers. Additionally, ACCC alleged that the ads, which promoted investment in cryptocurrency or money-making schemes, were likely to mislead Facebook users into believing the advertised schemes were associated with well-known people featured in the ads. These include businessman Dick Smith, TV presenter David Koch and former NSW Premier Mike Baird. However, the schemes were, in fact, scams as the people featured in the ads had never approved nor endorsed them.

Photo courtesy: 123RF

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