Summary:
On November 17, 2009, Rebecca Swift, on behalf of herself and all other similarly situated, filed a class action lawsuit against Zynga Game Network Inc and Facebook, Inc in the United States District Court for the Northern District of California for violation of the Unfair competition law and the Consumers Legal Remedies Act, and for unjust enrichment. The lawsuit alleged the companies were liable for the scammy actions of their advertisers.
Allegations:
- The case filed by Swift sought to remedy the alleged fraudulent scheme perpetrated by Zynga who utilise social networking sites such as Facebook and Myspace to lure unsuspecting consumers into signing up for goods and services they don't want or need.
- Zynga is the company behind many popular games such as Farmville, Mafia Wars, Zynga Poker which claim to be free for users. The lawsuit alleged that although the games were free to play, Zynga developed various methods to "monetise" these games. One such way is through "special offers" to obtain virtual currency in these games. It is these offers, generally referred to in the industry as "lead-gens" (lead generators) that are the cause of widespread of deception of players of Zynga games.
- One example of a lead-gen that appeared on various Zynga sites was an online "IQ test" which offered users extra virtual currency if they obtained a certain IQ score on the test. To take the test, the consumer had to provide their cell phone number which led them to unwittingly subscribe to a useless SMS service billed monthly on the basis through their cellphone bill. Users who tried to unsubscribe from this SMS service were met with many hurdles. With these scams being brought to the spotlight, many media outlets began to question Zynga and Facebook's practices surrounding these advertisements.
Defence:
- Zynga executives admitted that the lead-gens that appeared on its game applications were designed to mislead consumers and generate revenues for its business. Zynga CEO, Mark Pincus described how shortly after founding Zynga he desperately needed the revenue in order to keep control of his company. He also boasted that this revenue was primarily generated through these lead-gen scams.
- As a response to the controversy, in November 2009 Zynga banned all advertisements and special offers promulgated through its games. Additionally, Facebook amended its user policies to prohibit the type of online advertisements that have misled so many people. However, there has been no attempt made by both companies to reimburse the millions of users misled by these scams.