A dispute between Facebook and an advertising data analytics firm could establish if social media companies can cut off a potential competitor’s access to user information without running afoul of unfair competition laws.
SAN FRANCISCO (CN) — A federal judge has refused to dismiss an advertising consulting company’s countersuit against Facebook for blocking its access to user data and encouraging Google to remove its application from the Google Play store.
Facebook disabled New York-based ad consulting firm BrandTotal’s accounts on Sept. 30, 2020, after finding the company violated its terms of service by offering a Google Chrome browser extension that collected data on Facebook users’ preferences, demographics and ads they encountered while browsing Facebook.
BrandTotal offered users cash rewards in exchange for users downloading the UpVoice browser extension so it could obtain more data on how users interact with Facebook ads. It then sold that information to its clients. The company says it fully disclosed its data collection practices to Facebook users that downloaded the application.
But Facebook found the company was harvesting data that would not typically be available to users through regular web browsing.
After disabling BrandTotal’s accounts, Facebook sued the company in October 2020, claiming it had violated the Computer Fraud and Abuse Act, an anti-hacking law from 1986.
BrandTotal then countersued Facebook for unfair competition and intentional interference with its potential economic advantage and contracts with its clients, app users, investors and Google.
In a 30-page ruling issued June 3 and unsealed Wednesday, U.S. Magistrate Judge Joseph Spero refused to dismiss several counterclaims against Facebook. The judge found BrandTotal adequately alleged that Facebook intentionally misled Google about its data collection disclosures to users.
In a Sept. 21, 2020, email to Google, a Facebook employee said the social network had identified “some Chrome extensions we believe are improperly scraping user [personal data] (e.g. gender, relationship status, ad interests, etc.) without proper disclosure,” including BrandTotal’s UpVoice application. One day after Facebook suspended BrandTotal’s user accounts, Google removed UpVoice from its store, which disabled most installed copies of the browser extension.
Facebook argued its employee’s email to Google was merely an “unfounded opinion” offered in good faith. Judge Spero found it was too early in the litigation to resolve that dispute.
Since the lawsuits were filed, BrandTotal introduced a new version of its UpVoice browser extension and shared its source code with Facebook before releasing the application. The new version does not collect users’ demographic data from Facebook and instead relies on users providing that information when they sign up. The new version also prompts users to confirm if they want to keep sharing data when a new user logs into Facebook on the same device. Because they reached an agreement on letting BrandTotal offer that version of its program, Spero denied BrandTotal’s motion for a preliminary injunction as moot.
Spero refused to dismiss claims that Facebook intentionally interfered with BrandTotal’s contracts with customers, UpVoice users and Google. However, he dismissed a claim that Facebook harmed BrandTotal’s relationship with investors.
“BrandTotal cites no authority for the proposition that harm to a company constitutes interference with its existing investor contracts merely on the basis that it reduces investors’ expected returns,” Spero wrote.
Spero also advanced claims of intentional interference with prospective economic advantage based on the theory that Facebook harmed BrandTotal’s relationships with clients, app users and Google.
He found BrandTotal met the minimum standard for advancing a claim under the unlawful prong of California’s Unfair Competition Law, but he dismissed claims based on the unfair and fraudulent prongs of that same law.
For the unfair prong, Spero found BrandTotal did not adequately define the market that Facebook is accused of monopolizing. BrandTotal defined the market of commercial advertising data as comprising of “at least Facebook’s site, which has more users than the size of by far most countries in the world.” Spero said BrandTotal did not explain “why data regarding advertising on other social media networks — or perhaps other media entirely — is not an economic substitute for information about Facebook ads.”
Addressing the fraudulent prong, Spero dismissed a claim that Facebook’s request that Google investigate the UpVoice app was “fraudulent.”
Spero found BrandTotal lacked support for its theory that a “onetime communication” to a “third-party corporation” could form the basis of a fraud claim.
Spero granted BrandTotal leave to amend the dismissed counterclaims, except for the fraud claim, which he dismissed with prejudice.
In an emailed statement Thursday, BrandTotal attorney Rudy Telscher of Husch Blackwell in St. Louis said the court “made clear” that BrandTotal’s unfair competition and tortious interference with contract claims will move forward.
“BrandTotal is currently considering whether it is worth amending some of the dismissed counterclaims to pursue them in view of the court allowing important counterclaims to move forward already,” Telscher said.
Facebook attorney Allison Schultz, of Wilmer Cutler Pickering Hale and Dorr in Washington, did not immediately return an email requesting comment Thursday.