Meta Hit with Amended Complaint Over Alleged Ad Overcharges

• by Wendy Davis , Yesterday

Aiming to restore claims against Meta Platforms, the South Carolina gym Iron Tribe Fitness has filed an amended complaint alleging that Facebook overcharged advertisers around $4 billion between 2013 and 2017.

"For over four years, Facebook systematically overcharged advertisers, reaping billions of dollars in illicit profits," Iron Tribe alleged in a revised complaint filed this week with U.S. District Court Judge Charles Breyer in the Northern District of California.

"These overcharges were contrary to promises Facebook set forth in Facebook’s agreements with advertisers," Iron Tribe adds.

The new complaint comes in a dispute dating to April, when Iron Tribe sued Meta for allegedly failing to honor representations that its auction system for ads would protect companies from overbidding.

The allegations center on Facebook's system for charging advertisers that submit winning bids in auctions. The gym specifically alleged that starting in 2013, and continuing until at least 2017, Facebook purported to use a version of a “second price” auction system, but instead inadvertently used a “blended price” system.

In a “second price” auction, the company with the highest bid wins the auction, but isn't charged more than the company with the second highest bid. But in a “blended price” system, the winning bidder is charged a price between its bid and the bid that came in second.

The move to a “blended price” system was due to an error in a 2013 software update, according to the complaint.

Iron Tribe also alleged that Facebook learned of the error in 2017, but did not immediately correct the issue.

A former Facebook executive "quantified the impact of that 2013 coding change at '$1B a year,'" Iron Tribe alleges, adding that the total overcharges "amounted to roughly $4 billion in excess, illicit advertising revenues for Facebook, at the expense of its own customers."

Meta previously argued the complaint should be dismissed, contending that the claims fell outside California's four-year statute of limitations. The company also argued that Iron Tribe didn't actually allege in the complaint that it was overcharged.

Last month, Breyer directed Iron Tribe to amend its complaint and bring it again within 30 days, according to court records. Breyer reportedly dismissed the initial complaint at the time. He did not issue a written decision explaining the ruling.

Iron Tribe alleges in its amended complaint that it "regularly" advertised on Facebook during the time the company allegedly overcharged advertisers.

For instance, Iron Tribe alleged, it was billed around $162 for ads placed between July 30 and August 30, 2014.

"Rather than being charged the prices that would have resulted had Facebook’s advertising platform operated as intended as a second-price auction, Iron Tribe was overcharged the prices that resulted from Facebook’s operation of a blended-price auction," the complaint alleges.

The complaint also asserts that Iron Tribe's attorney -- referred to in the papers as "undersigned counsel" -- first learned of the alleged overcharges two years ago.

"In November 2023, undersigned counsel spoke with an individual with first-hand knowledge of the coding change and its impact on Facebook advertisers, learning for the first time about the misconduct complained of," the complaint states.

Meta has not responded to MediaPost's request for comment.