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Is Facebook Unfairly Marketing Minors?

4 Dec, 2012 By: Arthur Yoon, Jeffrey Richter


Advertisers who promote goods and services that appeal to children need to be aware that, although a sales contract between two parties is generally binding, an often-overlooked exception is where one of the parties to the contract is a minor. In a lawsuit (I.B. v. Facebook Inc.) filed against Facebook, a plaintiff mother, individually and on behalf of her minor child, alleged that Facebook engaged in unfair business acts and practices in violation of the California Unfair Competition Law (UCL) by actively advertising, marketing and promoting Facebook Credits, which is a payment system for users to make purchases within the Facebook website, with the statement that “all sales are final” when Facebook knew that minors were making such purchases and that minors had the right to void the contracts under the California Family Code.

In this case, a minor asked his mother for permission to spend $20 on his Facebook account using his her MasterCard. The minor purchased Facebook Credits from Facebook for use in the computer game “Ninja Saga.” Subsequently, without any notice that his mother’s credit card information had been stored by Facebook and the Facebook Credits system, or that his mother’s credit card information was being used again after the initial $20 purchase, the minor made in-game purchases for which he thought he was spending virtual, in-game currency. As a result, the mother’s credit card was charged repeatedly and without her consent, and the charges totaled several hundred dollars. Upon discovering the transactions, the mother tried to obtain a refund from Facebook by leaving a phone message at a phone number listed for Facebook but received no response.

The UCL prohibits unfair business acts or practices. If a business practice violates a specific constitutional, statutory or regulatory provision, it may be considered unfair in violation of the UCL. The plaintiffs alleged that Facebook’s practices specifically violate public policy of protecting minors from abusive and predatory practices as contemplated under the Family Code. The Family Code restricts minors from entering a contract relating to any personal property not in the immediate possession or control of the minor. Such contracts are automatically void. The Family Code further permits a minor to disaffirm a contract during minority or within a reasonable time after reaching majority. Disaffirmation by a minor rescinds the entire contract, rendering it void.

Facebook attempted to dismiss the claim, arguing – among other things – that the Family Code should not apply since the minor received the full benefit of the Facebook Credits that he purchased by using the credits to make in-game purchases in Ninja Saga. The court, however, disagreed and ruled that the plaintiffs sufficiently stated a claim for unfair business practices under the UCL based on the well-established doctrine of infancy underlying the inability of a minor to enter into a contract relating to any personal property not in the control of the minor and a minor’s right to disaffirm contract. Accordingly, the court denied Facebook’s attempt to dismiss the claim and permitted the plaintiffs to proceed with their lawsuit.

The Facebook case demonstrates that an advertiser that provides a minor with goods and services does so at its own risk. If an advertiser is potentially selling its goods and services to a minor, the advertiser needs to implement sufficient business practices by which the minor’s parent or guardian (but not the minor) actually purchases the good or service for the minor. A contract of a minor, otherwise, may be cancelled.

Jeffrey Richter and Arthur Yoon are partners at Los Angeles-based Finestone & Richter. They can be reached at (310) 575-0800, or at jrichter@frlawcorp.com and ayoon@frlawcorp.com.
 


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