UK: Dirty Clicks

Last Updated: 2 August 2007
Article by Mike Conradi

This article first appeared in Legal Week, June 2007

Introduction

The past few days have seen a number of significant indications of the new and growing importance of online advertising. In the first place, research from the Internet Advertising Bureau revealed that the money spent on UK internet advertising last year topped 10% of the total advertising spend across all media for the first time, with a figure of around GBP£2bn in total expenditure1. Secondly there have been a number of record-breaking acquisitions in the sector. Google agreed to buy Doubleclick, one of the leaders in distributed digital advertising, earlier this year for US$3.1bn, WPP agreed to buy 24/7 RealMedia, another digital tech and advertising business, for US$650m and then, just a day later, Microsoft announced the acquisition of Aquantive for US$6bn.

Most of this market, whether search-based advertising as exemplified by Google’s core-business, or display-based or banner advertising, as practised by the target "ad server" companies in these mammoth acquisitions, operates on one of two models. "Pay per click" (PPC) advertising means that advertisers pay a fee every time their advert is clicked on by a viewer, and "pay per impression" advertising (known as "CPM" for cost per thousand-impressions) means that advertisers pay a fee every time their advert is displayed.

As the size of the online advertising market grows, though, so too does the problem of "click-fraud". This type of fraud falls into two categories:

  • Affiliate Fraud, which occurs when ad server affiliates (websites that have agreed with companies like those mentioned above to include PPC or CPM advertising in return for a share of the revenues generated) artificially generate clicks in order to beef up their own commissions; and
  • Competitor Fraud, which occurs when an advertiser’s competitors, or other people with an axe to grind for some reason (such as disgruntled former employees) deliberately click (for PPC adverts) or re-load (for CPM ones) repeatedly their target’s adverts in order to waste marketing budget.

The methods used to perpetrate these types of fraud have developed from manual clicks to the creation of bogus content websites specifically designed to assist, with computer scripts used automatically to generate fake clicks on adverts. Estimates of the extent of click fraud vary, but most observers seem to agree that around 10% of online advertising expenditure is wasted in this way, though some put the figure as high as 50%2.

Legal liability of the fraudster

Whether or not the click-fraudsters are committing a criminal offence, the issue of whether damages can be recovered from them in a civil action is in question (even assuming that the fraudsters can be identified). This is because it is difficult to see what cause of action might apply, and who the claimant would be. In the case of affiliate fraud, the ad server itself could claim for breach of contract, but, since there is no direct financial loss, they may have difficulty establishing damage - their only loss is likely to be damage to reputation. In the case of competitor fraud even this route is not available, there being no contract between the ad server and the fraudsters in this instance.

The direct victims of the fraud, the advertisers, have a similar problem in identifying a cause of action. One tort which may assist is the little-used economic tort of "unlawful interference with business". Although rare, fortunately, the necessary elements for this tort were very recently reviewed in the House of Lords in a single judgement dealing with three cases involving claims for economic torts (one of which, Douglas v Hello!, has been much reported-on for its comments on the law of confidentiality and privacy)3.

In that judgement, the court held that the tort "consists of acts intended to cause loss to the claimant by interfering with the freedom of a third party in a way which is unlawful as against that third party and which is intended to cause loss to the claimant"4. The court added that it is also necessary that the claimant be damaged in fact.

Applying this test to the case of click-fraud we arrive at the conclusion that it may be possible for an advertiser to bring a claim in cases of competitor fraud, since the fraudster, in that case, has the requisite intention to damage the claimant. However there is also the requirement that the conduct complained-of constitute an "unlawful act", meaning one which would permit the third party themselves to bring a direct civil claim. In the case of competitor fraud, as discussed above, it may be difficult for the ad server to bring a claim because of the problem in identifying which cause of action could apply. By contrast, in the case of affiliate fraud, whilst there will be less difficulty in meeting the "unlawful act" requirement (the court in the Douglas case stated that there would still be an "unlawful act" where the only reason the third party could not bring a claim was the lack of damage5), the problem here is that there is no intention specifically to harm the claimant – so any such claim would probably fail.

In summary we can only conclude that any civil claim against a fraudster, whether made by an ad server or by an advertiser who has suffered loss, would meet some significant problems, and that, to succeed, it may have to break new legal ground.

Legal liability of the ad servers

Because of the difficulties in identifying the fraudsters and then in establishing a claim against them, aggrieved advertisers are perhaps more likely to seek to bring as claim against the ad server. One possible claim might be for breach of a contractual term (whether express or perhaps implied) that they will use reasonable care to prevent click-fraud, assuming that such a term can be shown to apply and that liability for it is not excluded by the contract’s "liability" provisions. Another possibility might be to bring a claim for negligently causing (or not preventing) damage, though since the type of loss suffered is pure economic loss, and since it is well-established that it is difficult to show a duty of care in such situations, such a claim may not be entirely straightforward.

Nevertheless, at least in the USA, Google did, last year, settle for up to US$90m a class action law suit (brought by Lane's Gifts & Collectibles as lead plaintiff) claiming it had not done enough to detect and prevent click fraud.

Future Steps – Industry Guidelines, Mobile Advertising and the move away from PPC

In recognition of the problem of PPC fraud, in August 2006 the Interactive Advertising Bureau (an industry trade association) announced a working group to create click measurement guidelines and to work towards a full auditing procedure6. These "Click Measurement Guidelines" are yet to be finalised but are expected within the next few months.

In the meantime, though, there has been increased interest in forms of online advertising that are less susceptible to fraud than PPC and CPM. By contrast to the "traditional" online advertising world, the market for advertising via mobile phone content is still very much in its infancy and this is a highly innovative sector. Unfortunately, though, not all the innovation is welcome and problems of the fixed online world are increasingly migrating to the mobile one. Spam, for example, has its corollary in "SPIT" (spam over internet telephony) and as online advertising moves to mobile so the problems of "click fraud" seem likely to follow too.

Mobile advertising though has one significant advantage over fixed in this respect – it is much easier to monitor whether customers have made phone calls directly from an ad. This means that a "pay per action" model, where advertisers only pay a fee if customers do something such as make a phonecall or place an order, is much more attractive in the mobile sector. A "pay per action" model is thought likely to avoid click fraud because it is much more difficult and expensive for a fraudster to generate fraudulent hits.

We may, then, find that the current popularity of PPC and CPM advertising, increasingly beset by the problem of click fraud, will end up being just a temporary feature of the online advertising market and that, driven in particular by the expected growth of the mobile-advertising, the more robust model of "pay per action" becomes increasingly the norm.

Footnotes

1 http://news.bbc.co.uk/1/hi/business/6675061.stm

2 http://www.economist.com/opinion/displaystory.cfm?story_id=E1_RPTJVDV

3 OBG Limited and others (Appellants) v Allan and others (Respondents); Douglas and another and others (Appellants) v Hello! Limited and others (Respondents); Mainstream Properties Limited (Appellants) v Young and others and another (Respondents) [2007] UKHL 21

4 Ibid, paragraph 51

5 Ibid, paragraph 49

6 Hedley Byrne v Heller [1964] AC 465

7 http://news.com.com/Google+click+fraud+settlement+given+go-ahead/2100-1024_3-6099368.html

8 http://www.iab.net/news/pr_2006_08_02.asp

www.kemplittle.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.