Uber Goes on Rare Legal Offensive, Suing Ad Agency for Fraud

(Bloomberg) -- Uber Technologies Inc. is accustomed to getting sued. Now it's doing the suing. And it's partly thanks to Breitbart News.

The global ride-hailing company is taking advertising agency Fetch Media Ltd. to court for click fraud, alleging that the firm improperly billed Uber for “fake” online ads and took credit for app downloads it had nothing to do with. Fetch is owned by the world's fourth-largest advertising company, Japan's Dentsu Inc.

Uber filed the lawsuit Monday afternoon in U.S. District Court in San Francisco. The company said it discovered something was amiss when it canceled a campaign on the conservative website Breitbart, where Fetch was placing Uber ads. As part of the lawsuit, Uber plans to seek at least $40 million in damages, according to people familiar with the matter, who asked not to be identified disclosing legal plans.

“We are shocked by Uber's allegations which are unsubstantiated, completely without merit, and purposefully inflammatory so as to draw attention away from Uber's unprofessional behavior and failure to pay suppliers,” Fetch Chief Executive Officer James Connelly said in a statement Tuesday. “We vigorously deny the allegations from Uber and will be responding robustly to ensure we set the record straight.”

Going on the offensive in court is a rare move for Uber. The company is a plaintiff in only two federal cases, according to data compiled by Bloomberg. Meanwhile, it has been a named defendant in about 250 federal cases. The data aren't comprehensive but show Uber is usually on the defensive.

Online advertising fraud has been a problem for the industry since the dawn of the internet. The practice has grown more sophisticated in recent years along with the amount spent on such ads. Fetch has acknowledged the challenge publicly and said it was working with research firm Forensiq to “fight against mobile ad fraud.”

“One of the biggest challenges we face as digital marketers is to reduce mobile ad fraud,” Fetch's Connelly said a year ago.

Around the same time, Fetch's global head of media, Steve Hobbs, told Adweek that a “significant amount” of downloads in Fetch's system are flagged as suspicious. “Where there's money, there is fraud,” he told the publication. “Being 100 percent on top of it is an impossibility, but we think with Forensiq's help we can get it significantly lower.”

Uber learned of the alleged fraud when it was trying to avoid scandal of a different kind. The company had asked Fetch not to post advertisements on Breitbart News, a site run by President Trump's former chief strategist, Steve Bannon. But it saw ads appearing there anyway.

Fetch pulled ads from all networks that had a relationship with Breitbart, but the move had little effect on the number of people downloading the app, contrary to Fetch's claims, the complaint said. Uber pays Fetch and other ad networks a fee when a potential customer downloads its app after seeing an ad. Uber alleged that after further inspection, Fetch had a widespread practice of over-billing. Uber claims that Fetch had been attempting to claim credit for app downloads it didn't generate.

“With Fetch, we learned the age-old lesson ‘buyer beware' the hard way,” the company said in an emailed statement. “Fetch was running a wild west of online advertising fraud.”

From 2015 to early 2017, Uber paid more than $82.5 million for advertisements overseen by Fetch, according to the complaint. Uber has refused to pay more than $7 million that Fetch has said it owes. Fetch's publicly traded parent company Dentsu, which has a 1.36 billion yen ($12 billion) market capitalization, is not named in the lawsuit.

Fetch's Connelly said there is “no basis to these claims” by Uber relating to ad-fraud as a reason not to pay it's invoices. “Fetch takes ad fraud extremely seriously and has been working with clients and suppliers to minimize its impact within ad networks,” he said.

--With assistance from Kartikay Mehrotra

To contact the reporter on this story: Eric Newcomer in San Francisco at enewcomer@bloomberg.net.

To contact the editors responsible for this story: Mark Milian at mmilian@bloomberg.net, Molly Schuetz

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