Google has no duty to refund gift card scam victims, judge finds - Ars Technica

Nov 06, 2024

FTC has estimated that a large chunk of gift card scams target Google Play users.

There's nothing unfair about Google collecting fees to profit off Google Play gift card scams while refusing to refund victims who collectively lost millions, federal Judge Beth Freeman ruled Monday.

Largely granting Google's motion to dismiss a proposed class-action suit seeking substantial damages for a range of allegedly unfair practices, Freeman found that Google is shielded from liability because the tech giant did not induce victims to purchase the gift cards—scammers did.

The lawsuit was filed by Judy May, who lost $1,000 in 2021 when scammers tricked her into buying Google Play gift cards by claiming she was eligible for a government grant. May was told she could send codes from the gift cards to cover "certain costs upfront to receive same-day delivery of the grant money." After she fell for it, she realized she'd been scammed, but Google refused to provide a refund, citing terms May considered "unconscionable."

May claimed that Google knows that its gift cards are a preferred way for scammers to steal funds and should put warnings on gift cards alerting customers to common scams. Her complaint noted that gift card scams are underreported, while citing Federal Trade Commission data finding that Google Play gift card scams accounted for 20 percent of reported gift card scams between 2018–2021 and triggered more than $17 million in losses.

Google takes a 15 to 30 percent commission when gift cards are used to make purchases in the Play Store, May's complaint said. In that way, Google allegedly profits off scams while telling customers "there is nothing Google can do"—downplaying the fact that Google had the "technical means to track transactional information related to the Google Play gift cards."

But Freeman ruled that "May suffered economic harm because of third-party scammers’ fraudulent inducement, not Google’s omission or misrepresentation."

Additionally, May failed to show that Google had any duty to refund customers after Google cited Target and Walmart policies to show that it's common to refuse refunds.

Freeman mostly sided with Google, deciding that the company engaged in no unfair practices, while noting that May had not used the gift cards "in their designed way." The judge also agreed with Google that May's funds were not considered stolen at the time she purchased the gift cards, because May still controlled the funds at that point in time.

Additionally, May's attempt to argue that Google has the technology to detect scams failed, Freeman wrote, because May couldn't prove that Google deployed that technology when her particular scam purchases were made. Even after May argued that she reported the theft to Google, Freeman wrote, May's complaint failed because "there is no allegation that Google had a duty to investigate her report."

Ultimately, May's complaint "identifies no public policy suggesting Google has a duty to refund the scammed victims or that the harm of Google’s conduct outweighs any benefits," Freeman concluded.

In her order, Freeman provided leave to amend some claims in the next 45 days, but Ars could not immediately reach May's lawyer to confirm if the complaint would likely be amended. However, the judge notably dismissed a claim seeking triple damages because May's complaint "failed to show a likelihood that May will be a victim of gift card scams again given her awareness of such scams," which may deflate May's interests to amend.

That particular part of the ruling may be especially frustrating for May, whose complaint was sparked by a claim that she never would have been victimized if Google had provided adequate warnings of scams.

Google did not immediately respond to Ars' request to comment.