Reddit Accused of Charging for Fake Ad Clicks in Class Action Lawsuit

A company that uses artificial intelligence to help people trade stocks is suing Reddit, alleging the social media platform charged them for fake clicks on their ads. The lawsuit claims Reddit did not take adequate measures to prevent "click-through fraud," costing the company money without generating any leads.

LevelFields Inc. filed the proposed class action lawsuit against Reddit, Inc. on May 8 in a California federal court, alleging breach of contract and violation of California's Unfair Competition Law. 

Reddit operates a social media website that allows users to share information and opinions with other users. ​It also offers an advertising platform that allows businesses to create and display ads on the platform. 

The lawsuit alleges that Reddit breached its contracts with advertisers by collecting fees for clicks that were “fake,” and by failing to implement effective oversight over the generation of clicks. 

Click-Through Fraud: A Digital Con Job

Click-through fraud refers to the practice of intentionally clicking on online ads without any genuine interest in the advertised product or service. These clicks are often generated by automated software programs, costing advertisers money without delivering any real value.

LevelFields argues that Reddit allowed this type of fraudulent activity to occur on their platform, charging them for clicks that did not translate into website traffic or potential customers. It is not “fraud” as is understood by the law, rather it describes purposeful clicks on advertisements by someone other than a potential customer, LevelFields says.

“Click-through fraud perpetrators exploit the nature of pay-per-click advertising to increase the pay-per-click fees paid by competitors and boost the placement of their own advertisements,” the lawsuit says.  

LevelFields says many of the fraudulent clickers use software programs that automatically click on ads hundreds or thousands of times. However, click-through fraud can be prevented by tracking the use of a pay-per-click advertisement – and Reddit didn’t protect its advertisers by doing so, the lawsuit alleges.

Did Reddit Turn a Blind Eye to Fake Clicks?

In September 2022, the company contracted with Reddit to authorize Reddit to place its ads on reddit.com, the lawsuit states. 

LevelFields says Reddit began charging it for clicks, but the LevelFields’ system did not log traffic which corresponded with the clicks they were charged for.

The company says it contacted Reddit to request their click logs which would show associated IP addresses. “Reddit, however, provided click logs without IP addresses,” the lawsuit states, and says it represented that it was not able to provide IP addresses.  

“Plaintiff is informed and believes that representation is false, because Reddit has to know where traffic was coming from for security and monitoring purposes…. As a result, Plaintiff is informed and believes, and on that basis alleges, that Plaintiff, and other Class Members, were charged by Defendant for fraudulent clicks,” the lawsuit says. 

Holding Reddit Accountable for Advertisers

Reddit could have and should have protected advertisers from the fake clicks on their ads, the lawsuit says. 

LevelFields points out that Reddit appears to be at least partially able to ascertain which “clicks” constitute “click-through fraud” because it has provided a small number of rebates to advertisers who have complained of being charged for “invalid clicks.”   

Plus, Reddit is in a unique position to track click-through fraud that originates through its own advertising program, since these advertisements are displayed on Reddit’s platform, the lawsuit says. 

The Reddit fake ad clicks class action lawsuit seeks to represent all US residents who paid for Reddit ads since May 8, 2020. LevelFields is requesting class action certification, restitution, damages, and a jury trial. They also aim to secure an injunction against Reddit's alleged practices of charging for fraudulent clicks.

Case Details:

• Lawsuit: Levefields Inc. v. Reddit Inc.
• Case Number: 3:24-cv-02760
• Court: U.S. District Court for the Northern District of California

Plaintiffs' Attorneys:

• Joshua H. Haffner, Alfredo Torrijos, and Trevor Weinberg (Haffner Law PC)
• David Koppelman (Koppelman Law Firm)