Suit Sheds Light on e-Commerce Fraud

A New Jersey online ad agency claims in a suit filed in federal court in Newark that it was defrauded by artificially generated Web traffic on a company's website, an issue e-commerce attorneys said is “extremely prevalent,” but rarely litigated.

In Congoo v. Sell It Social, Congoo LLC, trading as Adiant, is seeking to rescind a one-year contract it signed with Sell It Social, a New York company operating an e-commerce website called Rebel Circus, which sells novelty T-shirts and coffee mugs. Adiant claims Sell It Social is charging it $300,000 in fees based on Web traffic counts on the Rebel Circus site that are largely generated by “click farms” or other artificial means.

Adiant concluded that the Rebel Circus site has a “substantial presence” of “fraudulent visitors” based on a count of five clicks per hour on a blank space that the ad agency posted in lieu of advertising, the suit says. Adiant's ads generate 17 clicks per hour from visitors to the Rebel Circus site, according to the complaint. A “click conversion analysis” showing a statistically low purchase rate further indicates the presence of fraudulent visitors, the suit claims.

So-called “click fraud” is “extremely prevalent,” so much so that fighting it has become an industry of its own, says Victor Elgort, who is chair of the e-commerce and information technology practice group at Norris, McLaughlin & Marcus.

A variety of anti-click fraud applications have been developed to head off the problem before it occurs, and Google has a team of investigators that address it, Elgort says. After the fact, if click fraud is suspected, an array of analytical approaches are available to determine the presence of click farms, according to Elgort.

However, litigation over click fraud is rare, because the problem is seen as unavoidable and programs designed to detect it are not foolproof, says Kurt Olender of OlenderFeldman. Average click fraud is in the range of 10% percent, he says.

In Congoo, Adiant first contracted to provide advertising on Sell It Social's website in November 2014, agreeing to pay based on the number of bona fide visitors to the plaintiff's ads. But five days later, after discovering numerous “fraudulent visitors” to the plaintiff's ads, Adiant rescinded the contract, according to its complaint.

The parties negotiated a new contract after the defendant represented that it had resolved the fraudulent traffic problem, but Adiant again determined that most of the visits to its ads from the defendant's website are fraudulent, the suit says.

Olender say the case is “going to be a battle of the experts,” with each side seeking to prove its technology and methods are appropriate for measuring Web traffic.

Charles Toutant writes for the New Jersey Law Journal, an ALM sibling of this newsletter.

A New Jersey online ad agency claims in a suit filed in federal court in Newark that it was defrauded by artificially generated Web traffic on a company's website, an issue e-commerce attorneys said is “extremely prevalent,” but rarely litigated.

In Congoo v. Sell It Social, Congoo LLC, trading as Adiant, is seeking to rescind a one-year contract it signed with Sell It Social, a New York company operating an e-commerce website called Rebel Circus, which sells novelty T-shirts and coffee mugs. Adiant claims Sell It Social is charging it $300,000 in fees based on Web traffic counts on the Rebel Circus site that are largely generated by “click farms” or other artificial means.

Adiant concluded that the Rebel Circus site has a “substantial presence” of “fraudulent visitors” based on a count of five clicks per hour on a blank space that the ad agency posted in lieu of advertising, the suit says. Adiant's ads generate 17 clicks per hour from visitors to the Rebel Circus site, according to the complaint. A “click conversion analysis” showing a statistically low purchase rate further indicates the presence of fraudulent visitors, the suit claims.

So-called “click fraud” is “extremely prevalent,” so much so that fighting it has become an industry of its own, says Victor Elgort, who is chair of the e-commerce and information technology practice group at Norris, McLaughlin & Marcus.

A variety of anti-click fraud applications have been developed to head off the problem before it occurs, and Google has a team of investigators that address it, Elgort says. After the fact, if click fraud is suspected, an array of analytical approaches are available to determine the presence of click farms, according to Elgort.

However, litigation over click fraud is rare, because the problem is seen as unavoidable and programs designed to detect it are not foolproof, says Kurt Olender of OlenderFeldman. Average click fraud is in the range of 10% percent, he says.

In Congoo, Adiant first contracted to provide advertising on Sell It Social's website in November 2014, agreeing to pay based on the number of bona fide visitors to the plaintiff's ads. But five days later, after discovering numerous “fraudulent visitors” to the plaintiff's ads, Adiant rescinded the contract, according to its complaint.

The parties negotiated a new contract after the defendant represented that it had resolved the fraudulent traffic problem, but Adiant again determined that most of the visits to its ads from the defendant's website are fraudulent, the suit says.

Olender say the case is “going to be a battle of the experts,” with each side seeking to prove its technology and methods are appropriate for measuring Web traffic.

Charles Toutant writes for the New Jersey Law Journal, an ALM sibling of this newsletter.