Facebook, Instagram Sue Over “Ad-Cloaking”

Social media titans Facebook and Instagram have filed a complaint against Basant Gajjar, doing business as LeadCloak, for breach of contract. Facebook claims that since May 2016, LeadCloak has “enabled and assisted fraudulent advertisers in circumventing Facebook’s and Instagram’s advertisement review process using a practice known as ‘cloaking.’”

The complaint explained that “[c]loaking is a ‘bait-and-switch’ technique used to hide the true nature of the website linked to an ad from Plaintiffs, meanwhile presenting different content to users who clicked on the ad.” This is designed to mislead the ad review process to allow content that violates Facebook’s Advertising Policies. LeadCloak “developed, marketed, and sold software and services designed to cloak ads” in violation of Facebook and Instagram’s Terms and Policies. The ad cloaking was “used to promote…deceptive diet pills and pharmaceuticals, cryptocurrency investment scams, and even misinformation about the economic impact of the COVID-19 pandemic.”

Using the defendant’s service, an advertiser could select the ad review system, the fake landing page to show to the review system and the landing page to show to Facebook and Instagram users. LeadCloak would then code this content to circumvent the ad review system given the chosen information. The defendant charged customers between $399 and $1,999 per month for cloaking services or a pay-as-you-go plan. 

Since January 2018, the defendant’s cloaking service was allegedly “used to cloak the landing pages for hundreds of ads on Facebook.” For example, one ad showed a harmless landing page of an Amazon page for sweaters to Facebook’s ad review system, however, when a Facebook user clicked on the ad it brought them to a fake Fox News page advertising for a diet supplement using celebrity images. Facebook took various enforcement measures against the defendant and its customers, such as disabling users and ad accounts on the platform.

Facebook alleged that the cloaking technique violates the terms and conditions they agreed to when creating an account. They added that LeadCloak “interfered with…[its] service and has negatively impacted the Facebook and Instagram experience for users who viewed and clicked on ads containing landing pages cloaked using his software and service.”

Facebook has sought judgment in their favor, a permanent injunction against LeadCloak, an award for damages, to be awarded pre- and post-judgment interest and any other relief as determined by the court.

The suit was filed in the California Northern District Court. Facebook is represented by Hunton Andrews Kurth.