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Internet Advertising Contracts: Beware of Deceptive Practices

14 Aug, 2012 By: Jeffrey Richter, Arthur Yoon

It is critical for an advertiser to carefully review the terms of an advertising contract with a publisher to ensure that its advertisements are being published in accordance with the advertiser’s expectations. Unless an advertising contract specifies the pertinent publishing terms of the advertisement, an advertiser could wind up in a dispute over the terms of the placement, priority and website locations of the advertisement as demonstrated in a lawsuit filed by a seller on eBay (Custom LED LLC v. eBay Inc.) in a northern California U.S. District Court for breach of contract and false advertising.

In the lawsuit, eBay allegedly failed to provide a priority placement of the seller’s listing across eBay’s websites, such as eBay, eBay Motors, and eBay Stores, even though the seller had paid a premium fee under eBay’s “Featured Plus!” advertising program to have its listing placed in a featured section at the top of a search results list page.

eBay attempted to dismiss the lawsuit since, in its view, the contract for the advertising program only required that qualifying searches conducted from the eBay Motors website return “Featured Plus!” items in a featured section at the top of the search list. eBay claimed that the seller was attempting to impose an obligation that was beyond the scope of the contract.

The seller, on the other hand, argued that the contract guaranteed that in any search – initiated from any eBay webpage – “Featured Plus!” items should be shown in a featured section at the top of the results list. The seller contended the “Featured Plus!” description in the contract mandated that “Featured Plus!” items be placed in a featured section at the top of any responsive search list of all the eBay websites because of the interconnectedness of the eBay websites and because the advertising contract did not expressly limit the “Featured Plus!” advertising program to the eBay Motors website.

In reviewing the parties’ contract for the advertising program, the court found the language of the contract to be ambiguous. Neither party was able to point to any provision of the contract that defined what the “Featured Plus!” section is or how it was to operate. The court rejected eBay’s contention that the contract did not promise “priority” if consumers initiated their search from eBay’s main website because the “Featured Plus!” description specified in the contract did promise to list “Featured Plus!” items in a section at the top of the search results page without any limitation.

The court focused on the actual terms of the contract that expressly provided a “Featured Items section at the top of the search results page.” However, the court decided that, even though those terms provided a context, the meaning of that context would need to be determined on a full record addressing the objectively reasonable expectations of eBay sellers who post listings and, perhaps, eBay consumers who search for products. Thus, the seller was entitled to proceed with its lawsuit against eBay for breach of contract and false advertising.

Whether eBay ultimately will be found to have breached the contract or engaged in false advertising of its advertising program remains to be seen. An advertiser, nonetheless, that pays a premium rate to obtain a priority placement of its advertisement at the top of a search list result should confirm that its ads will be placed as it expects prior to its participation in any advertisement program, particularly those programs offered by publishers that place advertisements across multiple websites.

Jeffrey Richter and Arthur Yoon are partners at Los Angeles-based Finestone & Richter. They can be reached at (310) 575-0800, or at [email protected] and [email protected].

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