Antitrust Law Daily Wrap Up, ADVERTISING—NDCal: Google Promotion Was Not a Binding Offer; North Carolina Merchants Could Not Pursue California Unfair Competition Law Claims, (Apr 24, 2013)

By William Zale, J.D.

Merchants failed to state breach of contract claims by alleging that their credit cards were charged by Google during a 30-day "free trial" promotion of a service, and the merchants, citizens of North Carolina, could not pursue claims under the California Unfair Competition (UCL) Law, the federal district court in San Jose has ruled (Frezza v. Google Inc., April 22, 2013, Whyte, R.).

The plaintiffs relied on a 2010 blog posting for the Google Tags service (now discontinued), in which Google stated that it was "offering every business across the country the chance to try Google Tags free for 30 days!" and which described the promotion as a "free trial . . .with no strings attached." The blog further stated that "[y]ou can cancel before your trial is over and never pay a dime." The blog directed the users: "To start your free 30 day trial today, please visit our signup page or check out the help center for more details." A January 29, 2011, posting on Google Business Services made similar representations, and contained a link to "learn more." The plaintiffs alleged in a class action complaint that their credit cards were nevertheless charged fees for using Tags within the "free" 30-day trial period.

Breach of contract. It is a well-established rule that an advertisement generally does not constitute an offer, according to the court. The operative question under the California contract law, was whether the advertiser, in clear and positive terms, promised to render performance in exchange for something requested by the advertiser, and whether the recipient of the advertisement reasonably might have concluded that by acting in accordance with the request a contract would be formed, the court said, citing Sateriale v. R.J. Reynolds Tobacco Co., 697 F.3d 777, Advertising Law Guide ¶64,891, (9th Cir. 2012). In Sateriale, the court recognized that, in those cases where the offer is accepted by rendering a performance rather than providing a promise, an advertisement could form the basis of a unilateral contract if a party renders the performance.

The court rejected the plaintiffs’ contention that Google's promotional materials formed a binding offer, noting that the promotional materials directed the plaintiffs to a signup page or a help page to learn more about the promotion. No reasonable person would understand visiting the "signup page" or the "help center" as being the performance sought in return for the offer of 30 days of free Tags, the court opined. That the promotional materials were not contemplated to constitute an offer was clear from the undisputed fact that they made no mention of the requirement to provide credit card information, in the court’s view. The court dismissed the breach of contract claim with one final chance to amend.

Breach of implied contract. The court had previously dismissed the plaintiffs’ implied contract claim for failing to show that Google was contractually bound by the Data Security Standards (DSS) rules promulgated by the "payment card industry" (PCI). In an amended complaint, the plaintiffs alleged that when they provided their credit card information to Google, they entered into an implied contract with Google that it would abide by the DSS rules relating to retention and deletion of personal data. The allegations still failed to connect the dots to establish the existence of an implied contract, the court found. For example, the plaintiffs alleged that Visa is a member of the PCI, that Visa contractually obligates merchants to comply with "various [unspecified] security standards," and that Google accepts Visa credit cards, but failed to allege that Visa obligated Google to abide by the DSS rules for these particular transactions, that plaintiffs even paid with Visa credit cards, or that any alternative credit provider otherwise would have contractually bound Google to abide by the DSS rules.

The plaintiffs’ reliance on In re Facebook Privacy Litigation, 791 F. Supp. 2d 705, Advertising Law Guide ¶64,325 (N.D. Cal. 2011), was misplaced because that case involved disclosure of personal information as opposed to retention, the court pointed out. Here there was no allegation that Google inappropriately disclosed the credit card information. The court dismissed with prejudice the breach of implied contract claim for failure to allege an injury in fact.

California Unfair Competition Law. The plaintiffs alleged that Google's representations made in the promotional materials constituted "unlawful," "fraudulent," or "unfair" business acts or practices in violation of the UCL. Google argued, relying on Mazza v. American Honda Motor Co., 666 F.3d 581, Advertising Law Guide ¶64,536, (9th Cir. 2012), that the North Carolina plaintiffs cannot avail themselves of California's consumer protection laws. In Mazza, the plaintiffs had successfully sought certification of a nationwide class, but the Ninth Circuit concluded that applying California law to non-residents who purchased their products outside of California was unwarranted. Applying Califronia’s choice-of-law rules, the court determined that there were material differences between the law of the two juridisdictions, noting that under the UCL a plaintiff can recover only restitution and injunction relief, while N.C. Gen. Stat. §§75-1.1, 75-16 provided for mandatory treble damages, and §75-1.16.1 permits recovery of attorney’s fees upon a finding of willfulness. The court also found that North Carolina had an interest in applying its own law that would be more impaired than California’s interest, if the other state’s law were applied. The court dismissed the UCL claims with a final opportunity to amend.

The case is No. 5:12-cv-00237-RMW.

Attorneys: Joseph Jeremy Siprut (Siprut PC) for Rachel Frezza. Edward D. Johnson (Mayer Brown LLP) for Google Inc.

Companies: Google Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews