Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Consumer’s unlawful business practices claims against McAfee survive motion to dismiss, (Aug 25, 2014)

By Linda O’Brien, J.D., LL.M.

In a putative class action by an consumer against McAfee for an allegedly disparity between McAfee’s auto-renewal and off-the-rack pricing for its popular anti-virus software, the consumer adequately stated a claim under the unlawful prong of California’s Unfair Competition Law, the federal district court in San Jose has decided. The consumer’s fraud claims under the False Advertising Law and the fraudulent prong of the Unfair Competition Law, however, were dismissed (Williamson v. McAfee, Inc., August 22, 2014, Davila, E.).

Sam Williamson purchased a new desktop computer which came pre-installed with a 60-day free trial subscription to McAfee AntiVirus Plus software. During the activation process, the software displayed advertising to purchase a one-year subscription, offered a discount from the purported list price, and automatically enrolled him into an auto-enroll program.

Williamson filed suit against McAfee, alleging violations of California’s Unfair Competition Law and False Advertising Law (FAL), among other claims. Williamson asserted that customers are charged a higher price for their automatically renewed subscriptions that the company charges other customers for a one-year subscription. McAfee’s advertising that persuades customers that the auto-renewal program is in their best interests was false and misleading since those customers were consistently charged higher prices than the normal “then current price” offered to other customers. McAfee moved for dismissal.

UCL claims. The court found that the consumer adequately stated a claim under the UCL’s unlawful prong. The UCL make actionable any unlawful, unfair, or fraudulent business act or practice. The plaintiff alleged that, under the terms of the subscription agreement, the defendant agreed to auto-renew the subscription for a fee no greater that its then-current price and then breached the agreement by charging him a premium above the then-current price offered to all customers who were not enrolled in the auto-renew program. The court noted that, since the plaintiff adequately stated a claim for breach of contract, by extension, he also adequately stated a claim under the UCL’s unlawful prong.

However, the plaintiff’s fraud-based claims under the FAL and the fraudulent prong of the UCL failed, according to the court. Williamson did not allege reliance on McAfee’s representations that his subscription would be automatically renewed at the current price charged to other consumers. Although he alleged that the price offered for his initial purchase was discounted one, there were no allegations the defendant made any representations regarding future purchases pursuant to McAfee’s auto-renewal pricing policy.

The court found that Williamson also failed to adequately state a claim under the UCL’s unfair prong. The unfair prong of the UCL makes actionable any unfair business practice that either offends public policy or is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers. Although he sufficiently described the defendant’s practices, the plaintiff did not provide sufficient plausible allegations that those practices were harmful to consumers.

The case is No. 5:14-CV-00158-EJD.

Attorneys: Daniel Morley Kekoa Hattis (Hattis Law) for Sam Williamson. Daniel F. Katz (Williams and Connolly LLP), Ellen A. Cirangle (Lubin Olson & Niewiadomski LLP), and Michael F. Donner (Stein & Lubin LLP) for McAfee, Inc.

Companies: McAfee, Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews