Friday, October 15, 2010

Pop-up Ad Prior to Software Download Could Be Deceptive

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

Online purchasers of McAfee antivirus software stated plausible claims under the California Unfair Competition Law (UCL) that they were deceived by a pop-up ad into inadvertently purchasing a third-party product, the federal district court in San Jose has ruled.

After completing their McAfee purchase, but before downloading the McAfee software, the purchasers clicked a “Try It Now” button in a pop-up ad. Doing so enrolled them in a non-McAfee $4.95 per month subscription product called “PerfectSpeed,” as they discovered later upon noticing charges on their credit or debit card statements.

Billing Information Transfer

The pop-up was the result of a partnering arrangement between McAfee and Arpu, Inc., a company that places online advertisements that enable the purchase of products with a single click, in this case using the purchasers’ credit card information transferred from McAfee, according to the class action complaint. The purchasers alleged that McAfee received an undisclosed fee for each customer who subscribed to Arpu’s services through the ad on McAfee’s site.

The purchasers alleged that McAfee transfers the confidential billing information of its customers without adequately disclosing (1) the nature of the services to which customers are subscribing, (2) the consumer’s commitment to pay recurring monthly fees for the service, (3) the terms and conditions of the subscription service, (4) the identity of the billing party, and (5) the manner by which the customer may cancel the service.

Fraudulent, Unfair Business Practice Claims

The purchasers’ complaint describing the allegedly misleading web pages and pop-up ad was specific enough to give McAfee the notice required by the heightened fraud pleading standard under Rule 9(b) of the Federal Rules of Civil Procedure, the court determined.

In asserting that McAfee’s business practices were fraudulent under the UCL, the purchaser’s basic contention was that the pop-up ad led consumers to believe that clicking on it was a necessary step to download the McAfee software. While noting that visual cues in the pop-up—such as a “30 DAY FREE TRIAL” notice—tended to undermine the purchasers’ claims, the court nevertheless concluded that the purchasers alleged facts sufficient to state a plausible claim for relief.

The purchasers also stated a claim that McAfee’s business practices were unfair under the UCL because the deception was unscrupulous and caused injury to consumers which outweighed its benefits, the court held.

The court rejected the purchasers’ claim under the California Consumers Legal Remedies Act (CLRA) that the sale or lease of the PerfectSpeed software was a sale or lease of “goods” or “services” under the act. While acknowledging that the decision was a close call, the court observed that the CLRA expressly limited “goods” to tangible chattels.

To the extent the purchasers argued that the PerfectSpeed subscription should be considered a service, they did not allege enough facts as to the nature of the services provided to allow the court to draw that conclusion. McAfee’s motion to dismiss the CLRA claim was granted with leave to amend.

The October 5 opinion in Ferrington v. McAfee, Inc., Case No.: 10-CV-01455-LHK, will be reported at CCH Advertising Law Guide ¶64,007.

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