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Divided Appeals Court Rules Meta Must Face Class Action by Advertisers

 |  March 21, 2024

In a contentious decision, the 9th US Circuit Court of Appeals in San Francisco ruled in favor of advertisers, allowing them to pursue a class-action lawsuit against Meta Platforms, the parent company of Facebook and Instagram. The lawsuit accuses Meta of overcharging advertisers by artificially inflating the potential reach of their ads.

The ruling, split 2-1, enables advertisers to collectively seek damages over Meta’s alleged misrepresentation of ad reach metrics. Advertisers argue that Meta’s metrics, specifically the “potential reach” of ads, were misleading as they counted social media accounts rather than actual individuals, potentially inflating viewer numbers by up to 400%.

Despite this victory for advertisers, the court also ruled to decertify a separate class seeking injunctive relief, effectively barring advertisers from suing as a group for non-monetary remedies. The decision stemmed from uncertainties regarding the legal standing of the main plaintiff.

Read more: Meta Platforms Cuts Subscription EU Fees Amid Regulatory Pressure

Meta Platforms, headquartered in Menlo Park, California, relies heavily on advertising revenue, which amounted to a staggering $134.9 billion in 2023, with a net income of $39.1 billion. The lawsuit’s outcome could significantly impact Meta’s financial standing and advertising practices.

Circuit Judge Sidney Thomas, speaking for the majority, emphasized Meta’s consistent use of the allegedly deceptive metric, providing grounds for advertisers to prove damages resulting from a shared course of conduct. The ruling highlights the potential for class actions to offer more significant recoveries for plaintiffs while minimizing individual legal costs.

While this decision represents a setback for Meta Platforms, the company is likely to continue its legal battle as it navigates the complex landscape of advertising practices and consumer protection regulations.

Source: Reuters