Google Successfully Amends Its AdWords TOS to Add Arbitration Clause–Trudeau v. Google

October 7, 2018 · by · in E-Commerce, Licensing/Contracts, Marketing

Some AdWords advertisers are suing Google for allegedly misimplementing negative keywords. Google seeks to move the dispute to arbitration. In 2013, Google’s AdWords TOS said:

11 Term. Google may add to, delete from or modify these Terms at any time without liability. The modified Terms will be posted at www.google.com/ads/terms. Customer should look at these Terms regularly. The changes to the Terms will not apply retroactively and will become effective 7 days after posting. However, changes specific to new functionality or changes made for legal reasons will be effective immediately upon notice

An old-school amendment notice fraught with legal peril. In 2017, Google purported to amend the TOS to (among other things) add this provision:

12 Changes to Terms. Google may make non-material changes to these Terms at any time without notice, but Google will provide advance notice of any material changes to these Terms. The Terms will be posted at google.com/ads/terms. Other than changes made under Section 13(G), the changes to the Terms will not apply retroactively and will become effective 7 days after posting. However, changes made for legal reasons will be effective immediately upon notice.

Section 13(G) now says:

G. Future changes to Dispute Resolution Agreement. If Google makes any changes to this Dispute Resolution Agreement (other than a change to Google’s Notice Address), Customer or Advertiser may reject any such change by notifying Google via webform as set forth in Section 13(F) within 30 days of the change. It is not necessary to submit a rejection of the future change to this Dispute Resolution Agreement if Customer or Advertiser had properly opted out of arbitration in compliance with the requirements of Section 13(F). By rejecting a future change, Customer or Advertiser is agreeing that it will arbitrate any dispute in accordance with the language of this Dispute Resolution Agreement, as modified by any changes that Customer or Advertiser did not reject.

Section 13 adds a new arbitration clause, including a 30 day opt-out:

F. 30-day opt out period. Customer (both for itself and for any Advertiser that Customer represents) and Advertiser have the right to opt out of this Dispute Resolution Agreement. A Customer or Advertiser who does not wish to be bound by this Dispute Resolution Agreement (including its waiver of class and representative claims) must notify Google as set forth below within 30 days of the first acceptance date of any version of these Terms containing an arbitration provision (unless a longer period is required by applicable law). Customer’s or Advertiser’s notice to Google under this subsection must be submitted via webform available at adwords.google.com/nav/arbitration. An opt-out notice does not revoke or otherwise affect any previous arbitration agreement between Customer and Google or between Advertiser and Google

The court explained how Google purported to impose the new terms on advertisers:

Google gave notice of the 2017 TOS to the AdWords advertisers through multiple means, including through a direct email to the advertisers, a public blog post, and an alert on the advertisers’ AdWords account. Each notice directed the advertisers to a webpage where they could review and accept the modified terms, which were displayed in a single embedded window. Above the TOS window was the following admonition: “Please review these Terms carefully. They include the use of binding arbitration to resolve disputes rather than jury trials or class actions. Please follow the instructions in the terms below if you wish to opt out of this provision.” Advertisers were then prompted to accept or decline the terms.

Google notified Trudeau of the 2017 TOS by both email and an alert in his AdWords account. Trudeau accepted the 2017 TOS on September 15, 2017 and did not attempt to opt out of the arbitration provision.

There’s a lot not to like about how Google handled things. The original 2013 TOS expressly blocked retroactive changes, yet that’s exactly what Google purported to do with the 2017 arbitration provision. Perhaps more surprisingly, Google gets away with it!

Much of the opinion evaluates some technical legal arguments. The court focuses on some key facts: Trudeau agreed to the amendment and didn’t pursue the opt-out, and the 2017 revisions acted as a novation (thus completely overwriting the 2013 TOS and its contrary provision). Also, the court says Trudeau didn’t vigorously pursue unconscionability arguments. The court rejects Trudeau’s argument that the amendment process was illusory:

[Google] provided ample notice to the advertisers, required them to accept or decline, and gave them a valid opportunity to opt out. Simply put, there was no unilateral amendment of the contract that might render the provision illusory

So what did Google do right here?

  • I think Google’s amendment approach works much better for B2B contracts than B2C contracts. I wonder if the judge would have been as forgiving of Google’s approach if consumers were suing?
  • Providing an opt-out to the arbitration clause is crucial. While I don’t think courts require giving opt-outs for arbitration, it’s a valuable mechanism to enhance the odds of good formation with little risk that many folks will actually pursue the opt-out.
  • Google gave widespread notice of the terms to advertisers, not just posting the new terms on the site.
  • Most critically, Google required advertisers to agree to the new terms, rather than relying on some procedural trick to imply consent. I’m sure some advertisers never clicked to agree to the new terms, but many advertisers are going to keep coming back to AdWords because it’s profitable for them. So Google had the leverage to force advertisers through the new terms–leverage that most sites won’t have. Still, even for sites with less leverage over their customers, this ruling demonstrates that getting a new click on the new terms is legally defensible. Be careful cutting corners on the procedural front!

Case citation: Trudeau v. Google LLC, 2018 WL 4846796 (N.D. Cal. Oct. 3, 2018)