The U.S. Supreme Court on Monday rejected an appeal by Meta Platforms, the parent company of Facebook and Instagram, to block a class-action lawsuit by advertisers accusing the company of inflating audience metrics and overcharging for advertisements.
The decision upholds a ruling by the 9th U.S. Circuit Court of Appeals in San Francisco, which allowed advertisers to pursue damages collectively for Meta’s alleged misrepresentation of the “potential reach” of its ads. The class-action lawsuit, led by former Meta advertisers DZ Reserve and Cain Maxwell, claims that Meta exaggerated its ad viewership metrics by as much as 400% by focusing on the number of social media accounts rather than the actual number of individuals.
Legal Background
The appeals court’s 2-1 decision in March 2024 ruled that the advertisers could proceed as a group, arguing that their claims stemmed from a “common course of conduct” by Meta. This approach allows potentially millions of advertisers who paid for ads on Facebook and Instagram since August 15, 2014, to collectively seek damages, which they estimate could exceed $7 billion.
In its appeal to the Supreme Court, Meta challenged the lower court’s reliance on the “common course of conduct” test, arguing that other federal appeals courts have rejected this standard. Meta also contended that not all advertisers would have found the alleged misrepresentation significant or relied on it when purchasing ads.
Financial and Legal Implications
Advertising remains the cornerstone of Meta’s revenue, accounting for $116.1 billion in the first nine months of 2024. A decision in favor of the plaintiffs could result in substantial financial penalties for the tech giant and set a precedent for future class-action lawsuits involving advertising metrics.
Class actions are often favored by plaintiffs in cases involving widespread claims, as they can lead to larger recoveries at lower costs compared to individual lawsuits.
The lawsuit highlights increasing scrutiny of tech companies’ advertising practices and the metrics used to evaluate the effectiveness of their platforms, which are critical to advertisers’ decision-making and spending.