Hunton Retail Law Resource

The tidal wave of New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (“TCCWNA”) claims just swept up a novel argument: a class complaint against Facebook, Inc. argues that the popular social media site’s terms of use is subject to TCCWNA because Facebook profits from users’ personal information and intellectual property.

TCCWNA applies to “sellers” who offer, give or display a consumer contract, warranty, notice or sign to a “consumer.” Traditionally, TCCWNA cases have involved concrete seller/consumer relationships such as car dealerships and car buyers, public storage companies and renters, and restaurants and diners. But after a New Jersey Supreme Court decision holding that online coupons constituted consumer contracts, the number of TCCWNA suits and demand letters targeting online retailers exploded. The suit against Facebook represents a new frontier for this burgeoning area of law.

When a user signs up for Facebook, he or she confronts a registration page that states: “By clicking Sign Up, you agree to our Terms.” The plaintiff argues that TCCWNA applies to Facebook’s Terms because the heart of the popular social media site’s business model is selling advertisement placements based off of personal information provided by users. The plaintiff alleges that this quid pro quo – an exchange of personal information for use of Facebook’s platform – constitutes a seller/consumer relationship to which TCCWNA applies.

Social media sites like Facebook have reaped huge profits under this business model, making them ripe targets for plaintiffs. But the new line of reasoning may not stop at social media sites. As the Internet becomes a daily part of life for many people, more and more companies are commoditizing personal information shared through their websites – to package and sell, to analyze for targeted advertising or even just to subscribe users to a mailing list and send advertisements directly to the user’s inbox. The suit against Facebook could represent the tip of the iceberg for companies with an online presence that monetizes user information.

Aside from the above, the complaint follows a more customary line of argument: the plaintiff alleges that Facebook’s Statement of Rights and Responsibilities violates TCCWNA Section 16 because it includes a provision indicating that some jurisdictions may not allow certain provisions but does not state whether those provisions are allowed in New Jersey. The plaintiff originally filed the TCCWNA complaint against Facebook in New Jersey Superior Court in May of 2016, but Facebook removed to federal court. On July 13, 2016, Facebook filed a motion to transfer the case to the Northern District of California pursuant to the forum selection clause in its Terms and a motion to dismiss the complaint. If successful, the suit could expose Facebook to millions of dollars in liability: TCCWNA provides for a statutory remedy of $100 per violation, and the plaintiff alleges that his proposed class consists of “millions” of New Jersey residents.