Meta Overstated Figures for Facebook Advertising Class Action

Meta Platforms, Inc., formerly known as Facebook, Inc., is essentially an advertising company, earning money by selling ads. This class action is brought against it by a competitor, Metroplex Communications, Inc., alleging that Meta engages in unfair competition by making false and misleading statements about the number of people on Facebook and its potential and actual delivery of ads to people.

The class for this action is all persons (including entities) in the US who, between the applicable statute of limitations and the time the class is certified in this case, (1) operated a website or phone app and (2) sold advertisements to third parties to display on that website or app. A subclass has also been defined as all those in the above class who are citizens of Illinois.

Meta claims to be a “real identity” platform, where even business pages are linked to real individuals’ accounts. The complaint alleges, “The perception that advertisements will reach real people is material to consumers deciding whether to purchase advertisements from Meta or to instead purchase advertisements from a competitor of Meta.”

Meta’s public filings give important metrics for Facebook, including daily active users (DAUs) and monthly active users (MAUs). These figures, the complaint alleges, are calculated using internal company data.

The numbers of MAUs have grown steadily over the years, the complaint says. However, Meta has admitted that some accounts are duplicates or false accounts. Duplicates are those maintained by a user in addition to their main account. False accounts are either misclassified accounts (for example, accounts which have personal profiles for a business or a pet; these are supposed to have pages but no personal profiles) or violating accounts, which are for purposes that violate the terms of service (for example, for bots or spam).

In recent years, the complaint alleges that Facebook has estimated that around 11% of its accounts are duplicate accounts and around 5% are false accounts.

But the complaint claims that Meta has no accurate way of determining these numbers. It quotes an October 2021 Wall Street Journal article as saying that “an examination of roughly 5,000 recent sign-ups on the service indicated that at least 32% and as many as 56% were opened by existing users.” Facebook has also disabled large numbers of fake accounts, including 1.7 billion in the first quarter of 2020 alone.

The complaint suggests that Meta knows that its estimates of 11% duplicate accounts and 5% false accounts are understated and therefore inflate its MAU figures.

Because of that, the complaint asserts, the figures the company gives for the potential reach and achieved reach of ads, in numbers of people, are inflated and not a real count of “people.”

Although Meta has changed certain terms (for example, changing “Potential Reach” to “Estimated Audience Size”), and has clarified certain points, the complaint alleges that these things do not solve the basic problem—that is, the inflation of numbers of actual people that are offered or reported to advertisers.

Article Type: Lawsuit
Topic: Unfair Competition
Tags: Deceptive Advertising, False or Misleading Information, Unfair Competition