Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—N.D. Tex.: Dating website Match shakes off most of FTC suit, (Mar 29, 2022)

By Martin A. Steinberg, J.D.

The online dating service was protected by statutory immunity for content posted by third parties and that the FTC Act does not permit the FTC to seek monetary damages.

In an FTC action against Match Group, Inc. (Match) for engaging in various deceptive and unfair practices in managing its online dating service, a motion to dismiss the complaint was partially granted based on a recent U.S. Supreme Court decision that barred the FTC from seeking monetary damages and because certain activities of Match were protected by statutory immunity with regard to content posted by third parties. The FTC’s Motion to Exclude Matters Outside the Pleadings and Motion for Leave to File Sur-Reply were both denied (FTC v. Match Group, Inc., March 24, 2022, Kinkeade, E.).

Background. Match is the dominant online dating service in twenty-five countries, including the U.S. and operated several dating websites. It offers a free subscription to consumers, however, to see the identity and to communicate with other members, the customer was required to choose a paid tier, which committed the customer to automatic monthly charges. The free customers were repeatedly sent communications by supposedly interested parties and advertisements from Match. These ads contained content that originated from these third parties. The problem was that a considerable number of these third-party communications were scams. The FTC filed a five-count complaint against Match in 2019 alleging that Match engaged in deceptive and unfair practices by fraudulently inducing customers to upgrade to a paid tier through false claims of “interested” parties; offered a guarantee that failed to disclose the difficult steps necessary for a customer to gain a refund; unfairly exposed customers to the fraudulent content posted by third parties; and implemented deceptive billing practices that included ways to make canceling a subscription difficult. The FTC sought both injunctive relief and monetary damages.

Equitable monetary relief. Match asked the court to find the FTC was not entitled to equitable monetary relief under § 13(b). The U.S. Supreme Court granted certiorari to consider this exact issue before the court issued a ruling on Match’s motion to dismiss here and held in AMG Capital that Section 13(b) does not authorize the FTC to seek, or a federal court to award, equitable monetary relief in an action filed directly in court. Subsequent to AMG Capital, the FTC has conceded that the Supreme Court’s decision “precludes this Court from awarding equitable monetary relief under Section 13(b)” which the FTC seeks in relation to Counts I-IV. Thus, the court dismissed with prejudice the FTC’s claim for equitable monetary relief under Section 13(b) for Counts I-IV.

Immunity under Section 230 of the CDA. In Count I, the FTC sought to hold Match liable for its advertisements that allegedly misrepresent the communication sent from a user “interested in establishing a dating relationship” with the consumer, but, “in numerous instances,” it was sent from an account set up by someone with nefarious motives. Match argued that the Communications Decency Act (CDA) granted it immunity from liability for any content posted by third parties on its interactive website. No matter how artfully pled, it was clear from the Complaint that the underlying communication created by a third-party, a Match.com user, was truly “the specific harmful material at issue,” not the automatically generated advertisement sent by Match, the court determined. The FTC alleged the advertisements themselves are deceptive because they incorrectly lead a consumer to believe a fraudulent communication was sent by a legitimate user seeking a romantic relationship and this misrepresentation induces the consumer to purchase a subscription. However, the court found that the FTC could not get around its own allegations which placed third-party content at the core of Count I; without the communication from a fraudulent or flagged account, there can be no harm to any consumer. It was apparent from the face of the FTC’s Complaint that Match is entitled to immunity under § 230 (c)(1) for Count I.

In Count II, the FTC alleged Match “exposed consumers to the risk of fraud by providing recent subscribers access to communications that [Match] knew were likely to have been sent by persons engaging in fraud.” Under the CDA, an interactive service provider has immunity under the (c)(2) exemption for voluntary actions taken in good faith to block or screen offensive material. § 230(c)(2). It was apparent from the Complaint that the FTC sought to hold Match liable for exposing nonsubscribers to potential fraud because they received notification of communications from fraud-flagged accounts before Match completed its fraud review process; in other words, the FTC challenged the fraud review process Match conducted for its subscribers as compared to nonsubscribers. Match was clearly entitled to immunity on this claim under § 230(c)(2), the court ruled.

The FTC’s argument that Match acted in “bad faith” was merely semantics, in the court’s view. The FTC challenged Match’s conduct related to its internal efforts to review user accounts for being fake. The FTC sought to impose liability on Match for failing to conduct or complete its “fraud review” process before sending nonsubscribers advertisements of fraud-flagged communications thereby allowing them access to those communications. Congress chose to provide immunity for multiple reasons, including to avoid the “chilling effect” of service providers choosing to severely restrict the number and types of messages, the court noted. Finally, even if the Court agreed with the FTC that immunity under § 230(c)(2) does not apply, which it did not, Match would still be entitled to immunity for this claim under § 230(c)(1).

Based on the allegations in the Complaint, Match was acting as a publisher of third-party generated content and is entitled to immunity under § 230(c)(1) on both Counts I and II. Further, Match was entitled to immunity under § 230(c)(2) on both Counts I and II for any actions related to its fraud review process of user accounts.

ROSCA. Match asserted that the FTC’s Restore Online Shoppers’ Confidence Act (“ROSCA”) claim failed as a matter of law because the FTC alleges only that Match’s online method for cancelling a subscription is not simple. The court denied the Motion to Dismiss as to Match’s alleged violation of ROSCA. The FTC sufficiently pleaded this claim with facial plausibility.

FTC motions. The first one sought to exclude the evidence submitted by Match regarding the conduct of its business. Match argued that this motion should be denied since the court cannot consider any facts outside the pleadings. The court agreed with Match and denied the motion as unnecessary. The FTC also moved for leave to file a sur-reply. In denying the motion, the court felt that this was merely an attempt by the FTC to get in the last word.

The case is No. 3:19-cv-02281-K.

Attorneys: Reid Abram Tepfer for the FTC. Angela C. Zambrano (Sidley Austin LLP) for Match Group, Inc.

Companies: Match Group, Inc.

Cases: ConsumerProtection FederalTradeCommissionNews