Google Inc. said that it agreed to pay as much as $90 million in legal fees and advertising credits to settle a lawsuit filed against it and other Internet companies last year alleging that the companies knowingly overcharged for online advertisements and conspired to continue doing so.
The suit, originally filed in February 2005 by Lane’s Gifts & Collectibles, a Texarkana, Arkansas, retailer, alleges that the search companies improperly charged the plaintiffs for fraudulent clicks. Advertisers often pay Google and other Internet companies based on the number of times people click on their ads displayed alongside Web-search results and other online content. By clicking on the ads, or using software programs to automate the clicking, fraudsters can run up ad charges for rival advertisers or, in some cases, financially benefit themselves.
Under the proposed settlement, Google would provide credits toward ads on its system to Google advertisers who claimed to be victims of click fraud. Details of the exact claims and award processes and the amounts for individual awards proposed weren't disclosed. However, the proposal appears to essentially leave intact Google's defense of its handling of so-called click fraud and to spare it from having to disclose further details of its ad system and antifraud measures in court.
Google said the value of the settlement, including legal fees, wouldn't exceed $90 million. It currently requires advertisers to apply for reimbursement for "invalid" clicks within 60 days of their occurring. The proposed settlement would allow any U.S. advertiser to make a claim for click fraud that occurred since 2002.
Click fraud is an issue in the search industry partly because the search companies have declined to specify the scope of the practice and to detail their efforts to combat it.
Even if this settlement is approved, the Arkansas case will move forward against other defendants, including Yahoo! Inc., that don't carry ads from Google.
Significance: The size of the potential settlement indicates that some real questions still exist over the extent of responsibility search engines have to fight click fraud. The settlement also leaves a number of questions unanswered, including what Google and other search engines will be expected to do to fight click fraud going forward, and what proof claimants will need to provide to Google to get reimbursed for click fraud.