Google Settles AdWords Overcharging Suit for $20 Million
Google’s admitted practice of overcharging AdWords customers on a daily, but not monthly, basis will carry a $20 million price tag if approved by a federal judge. The company settled a proposed class-action lawsuit brought by CLRB Hanson Industries in U.S. District Court, San Jose, Calif., without admitting it was wrong to do. Google charged some advertisers up to 20 percent more than their daily budgets called for, to make up for days where their daily limits weren’t reached, but stayed within their monthly budget limits. Judge James Ware twice refused to dismiss the 2005 case, saying the daily overages were inherently injurious, but narrowed the class to advertisers whose ad campaigns lasted less than a month, ended mid-month, or “paused” their campaigns (WID Dec 19 p6).
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The parties reached a “tentative settlement in principle only after the parties conducted arduous arm’s-length negotiations and after the parties conducted extensive pre-trial discovery,” said a motion for approval. “Google argued vigorously that it had no liability whatsoever to the Class and that, in the unlikely event liability were established, the damages and restitution sought by the members of the Class were not so significant and were required to be offset by any gains achieved from the overdelivered ads.” Google and the plaintiffs will argue for Ware’s approval at a May 11 hearing.
The settlement awards will be available to advertisers either as cash or credits for AdWords purchases -- unpaid balances or future ads. Those who purchased on AdWords between June 1, 2005, and Feb. 28, 2009, and those who paused their AdWords campaigns on any day between Jan. 1, 2002 and Feb. 28, 2009, are eligible for refunds or credits. Plaintiffs’ lawyers can get more than a quarter of the $20 million -- up to $5.25 million in fees and reimbursements. The “representative” plaintiffs themselves, CLRB and Howard Stern, will get “incentive compensation awards” of $20,000 each. If there’s less than $200,000 remaining six months after Google starts distributing claims, the remainder will go to a charitable organization chosen by the plaintiffs, and if more than $200,000, Google will propose a new plan for distributing the remainder to class plaintiffs.
Google will advertise the settlement in the Wall Street Journal and USA Today in addition to making “reasonable efforts” to contact class members. If class members with claims totaling more than 5 percent of the overages opt out, Google has the option of terminating the settlement.
Agreeing to a settlement is historically unusual for Google, especially considering the hard line it’s taken against patent infringement plaintiffs, said Eric Goldman, director of the High-Tech Law Institute at Santa Clara University. “While Google can easily afford the dough, the settlement is a big enough sum to potentially attract further class-action lawyers seeking their piece of the Google fortune.” But lawyers in the future may be dissuaded by the tooth-and-nail fight Google put up for four years, Goldman said.