ICLE Amicus to the California Court of Appeal in Google v Superior Court
Amicus curiae the International Center for Law & Economics (“ICLE”) respectfully requests leave to file this letter in support of the petition for writ of mandate pending in Google, LLC v. Superior Court, No. H054687. (See California Rule of Court 8.487(e), advisory committee notes.) ICLE is a nonprofit, non-partisan global research and policy center focused on building the intellectual foundations for sensible, economically grounded public policy. Drawing on its background in law and economics methodologies, ICLE has longstanding expertise evaluating legal issues related to multisided platforms such as Defendant-Appellant Google. ICLE encourages the Court to grant review of Google’s writ petition, and ultimately to correct a misapplication of the Unruh Act that threatens significant, unanticipated harm to both consumers and advertisers.
The Superior Court’s decision in the underlying action, Haynie v. Google, No. 24CV446330 (Santa Clara Super. Ct.), has profound implications for online advertising and raises significant legal and practical concerns that could echo beyond the advertising industry itself. Targeted advertising is a crucial aspect of marketing, enabling advertisers to direct their messages to consumers who will actually find them useful based on demographic considerations, including age. The Superior Court’s decision would make any such targeted advertising unlawful under the Unruh Act, including socially beneficial and pro-consumer advertising, if based on age. Further, the Superior Court’s decision would do so even though it acknowledges that differential pricing based on age is not necessarily illegal under Unruh Act. If accepted, this theory of liability would make multisided platforms less useful to businesses wishing to advertise their products and services, would make advertisements less relevant to users, and would considerably increase the amount of age-inappropriate advertising reaching consumers young and old alike.
The Economics of Multisided Platforms: Google Is Free, Powered by Targeted Advertisements
Google’s search product (Google), video streaming service (YouTube), and email service (Gmail) are all what economists call multisided platforms. (See David S. Evans & Richard Schmalensee, Matchmakers: The New Economics of Multisided Platforms 10 (2016) [“Many of the biggest companies in the world, including . . . Google . . . are matchmakers . . . . [M]atchmakers’ raw materials are the different groups of customers that they help bring together. And part of the stuff they sell to members of each group is access to members of the other groups. All of them operate physical or virtual places where members of these different groups get together. For this reason, they are often called multisided platforms.]”.) On one side of the platform, Google provides answers to queries of users (Google), streaming videos (YouTube), or an email service (Gmail). On the other side of the platform, advertisers pay for access to Google’s users, and, by extension, subsidize the user-side consumption of Google’s free services. The consumer surplus generated by free access to Google’s services likely amounts to tens of billions of dollars a year to American consumers. (See Avinash Collis, Consumer Welfare in the Digital Economy, The Global Antitrust Inst. Rep. on the Digital Economy (2020), available at https://gaidigitalreport.com/2020/08/25/digital-platforms-and-consumer-surplus.)
In effect, Google brings together advertisers and users. The goal is to keep users engaged so advertisers can reach them. Advertisers then cross-subsidize access to Google’s platforms, allowing its products to remain free for users. Google is, in this sense, an “attention platform,” which supplies its services to its users while collecting data for targeted advertisements for businesses who then pay for access to those users.
To be successful on the user side, Google must serve users well to maintain demand for advertising, which includes making sure advertisements are relevant to those users. If platforms fail to provide useful services or relevant advertising, users will use the platforms less or may leave altogether. Naturally, advertisers are less likely to invest in these platforms.
On the advertising side, Google must be able to offer advertising that delivers value. This includes enabling advertisers to find their target audience better, and with more accuracy, than they could by other means. Click-through and conversion rates for targeted advertisements are significantly higher than non-targeted advertisements. As a result, advertisers generally prefer to use targeted advertising.
The United States Supreme Court has recognized that multisided platforms must balance the interests of each side to maximize the platform’s value, and has advised courts to take the nature of such platforms into consideration when engaging in an antitrust analysis. (See Ohio v. American Express Co. (2018) 585 U.S. 529, 534-537 [applying the analysis to credit card networks].) Likewise here, this Court should recognize that Google is able to offer free access to its services because of the effectiveness of its targeted advertising. This is to the benefit of users of all ages who would otherwise have to pay to access these services. Reducing the ability to target advertisements reduces the value of Google’s services to both consumers and advertisers.
For instance, an advertisement for a university is much more likely to be relevant to a person of typical college age than to a senior citizen. Conversely, an advertisement for a retirement home is much more likely to be relevant to a person of retirement age than to a younger person. An advertisement for a Medicare Part D plan will be more relevant to a Medicare-eligible person than a teenager. And an advertisement for a car insurance plan offering student discounts will be more relevant for a typical university-aged person than a retiree. There is no benefit to either the advertiser or the user in sending or receiving badly targeted advertisements. Google’s platforms would become much less valuable to both advertisers and consumers if age were prohibited from consideration under any circumstances.
A De Facto Ban on Age-Based Targeted Advertisements Under the Unruh Act Would Harm Both Consumers and Advertisers
The Unruh Act prohibits harmful discrimination. (Civ. Code, §§ 51, 51.5.) Courts have held that the Unruh Act does not bar practices “justified by ‘legitimate business interests.’” (Koebke v. Bernardo Heights Country Club (2005) 36 Cal.4th 824, 851.) Rather, the statute prohibits only discrimination that is “arbitrary, invidious or unreasonable.” (Javorsky v. Western Athletic Clubs, Inc. (2015) 242 Cal.App.4th 1386, 1395.) The “fundamental purpose of the Unruh Civil Right Act is the elimination of antisocial discriminatory practices—not the elimination of socially beneficial ones.” (Sargoy v. Resolution Trust Corp. (1992) 8 Cal.App.4th 1039, 1049.) Legislative enactments can be “evidence of public policy.” (Javorsky, supra, 242 Cal.App.4th at p. 1397.) But disparate treatment isn’t assumed to be against public policy “unless there was a statute favoring the class that was the beneficiary of disparate treatment.” (Ibid.)
In other words, while the Unruh Act provides robust protection against improper discrimination, it was not intended to forbid all differential treatment. Reasonable distinctions based on legitimate justifications remain permissible under the statute’s exceptions. This can include distinctions based on age.
Courts have repeatedly arrived at this conclusion outside the present advertising context. For example, in various contexts, age-based discounts have been deemed nonarbitrary because they advance policies like assisting those with limited incomes. (Javorsky, supra, 242 Cal.App.4th, at pp. 1401-1404; Sargoy, supra, 8 Cal.App.4th at p. 1044; Starkman v. Mann Theaters Corp. (1991) 227 Cal.App.3d at pp. 1491, 1498-99.) It is also “reasonable” to discriminate based on age to prevent minors from entering bars and adult bookstores. (Koire v. Metro Car Wash (1985) 40 Cal.3d 24, 31.)
Further, as the trial court recognized, there are California statutes that “support the proposition that businesses can treat customers differently based on age with respect to pricing.” (Order at 8.) However, the trial court went on to conclude that this principle doesn’t apply to “differential advertising based on age.” (Ibid., emphasis in original.) The court took judicial notice of the fact that “some banking, insurance, and other financial services have different products tailored for different age groups,” but concluded that this “does not foreclose Plaintiffs’ claims because Plaintiffs challenge differential advertising, not differential pricing.” (Id. at p. 9.)
This distinction makes no economic or logical sense. If it is permissible for businesses to offer different products and different prices based on age, then it cannot be “arbitrary, invidious or unreasonable” to advertise such products to the age-appropriate groups. As described above, targeting advertising based on age provides well-established benefits to both consumers and advertisers. Such age-segmented advertising is socially beneficial because it provides the advertising recipients with the more relevant and useful information compared to advertising that is not age-targeted.
Moreover, there are statutes at both the federal and state level that require treating users differently based on age when considering targeted advertising. For instance, the Children’s Online Privacy Protection Act (15 U.S.C. § 6501 et seq.) and its associated federal regulation (16 C.F.R. part 312) require verifiable parental consent for users known to be under the age of 13 before persistent identifiers used in targeted advertising can be collected. The California Age-Appropriate Design Code (“AADC”) also regulates the collection of geolocation data and tracking signals for all minors under 18 if a digital service is “likely to be accessed by children.” (Civ. Code, § 1798.99.31.) Portions of the AADC currently under injunction on unrelated grounds also require covered digital services to complete a data protection impact assessment that analyzes whether and how targeted advertising could harm children and mitigate the risk for those harms. (Ibid.) Online platforms like Google must already consider age to some degree for targeted advertising, including whether an advertisement is age appropriate.
The practical consequences of the trial court’s approach are far-reaching. Google operates its services as multisided platforms facilitating billions of interactions between users and advertisers. In this vast, complex environment, imposing liability on intermediaries like Google based on the age-differentiation choices of advertisers would amount to imposing a de facto ban on targeting generally. This would have significant practical consequences for multisided platforms beyond Google, as well as the consumers who use those platforms. The threat of overbroad liability would reduce the effectiveness of advertising in general. This means (1) less relevant advertisements for users of online services; (2) reduced value to advertising for businesses, in particular harming small businesses which have limited advertising budgets; and (3) less revenue for other online platforms which rely on advertising revenue, pressuring them to increase revenue through other means like higher advertisement prices, more obtrusive but less relevant advertisements, and subscriptions.
Advertisers may have many reasonable, nonarbitrary motivations for targeting their advertisements based on age. The trial court’s decision will lead to extensive, costly litigation about potential justification for such targeting, and in the meantime, consumers will be deprived of useful advertisements. If allowing for any segmentation of advertising based on age can trigger Unruh Act liability, multisided platforms like Google lose an essential tool for connecting people of all ages with relevant messages. The result will be to impede commerce and decrease the social utility of advertising while doing nothing to prevent truly invidious, arbitrary, or unreasonable discrimination.
To the Extent the Law Impacts Age-Based Targeted Advertising, Only Advertisers Plausibly Face Liability, Not Intermediaries
The trial court’s ruling also ignores the true role a multisided platform plays in the advertising context. Google, like other multisided platforms, is an intermediary. It provides a neutral tool. The individuals and entities placing advertisements are the primary actors choosing whether and how to use that neutral tool for targeting. As noted, under the Unruh Act, there are permissible uses of age differentiation. The focus in discouraging invidious age discrimination should be on primary actors. In this way, the Unruh Act should be read in parallel with Section 230 of the Communications Decency Act (“CDA”). (See 47 U.S.C. § 230(c)(1) [“No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider”].) Simply providing neutral tools for advertisers to use for targeting, including age, should not subject Google or similarly situated entities to liability. (See Fair Housing Council of San Fernando Valley v. Roommates.Com, LLC (9th Cir. 2008) 521 F.3d 1157, 1169 [“providing neutral tools to carry out what may be unlawful or illicit searches does not amount to ‘development’ for purposes of the immunity exception”], emphasis in original.)
While it is always possible that users of multisided platforms, such as advertisers, may misuse neutral criteria for harmful or discriminatory purposes, intermediaries like Google will often lack particularized ex ante knowledge of invidiously discriminatory acts or direct control over advertisers’ targeting choices. In the housing context, discrimination on the basis of protected characteristics is invariably illegal. (Cf. Roommates, 521 F.3d at 1169; Vargas v. Facebook, Inc. (9th Cir. Oct. 13, 2023) 2023 WL 6784359, at *2.) This makes it easy to know that advertisements for housing can’t use age information for targeting. But if the Unruh Act is read to make all targeted advertisements based on age illegal, Google will have to remove the ability of advertisers to use age altogether, harming both consumers and advertisers as a result. Such a blanket ban on differentiation is precisely what the Unruh Act’s focus on invidious discrimination was designed to avoid.
Further, if all age-based targeting of advertisements is impermissible under the Unruh Act, services like Google will restrict lawful advertising tools for all users to mitigate liability risks. Doing so would result in a chilling effect impacting a large amount of indisputably lawful and beneficial speech. (Cf. Counterman v. Colorado (2023) 600 U.S. 66, 75 [“Prohibitions on speech have the potential to chill, or deter, speech outside their boundaries. A speaker may be unsure about the side of a line on which his speech falls. Or he may worry that the legal system will err . . . . Or he may simply be concerned about the expense of becoming entangled in the legal system. The result is ‘self-censorship’ of speech that could not be proscribed—a ‘cautious and restrictive exercise’ of First Amendment freedoms.”].)
There is no reason to read the Unruh Act as in tension with both Section 230 of the CDA and the First Amendment’s protections for online speech, and principles of federal preemption and constitutional avoidance counsel against doing so. (See Mabry v. Superior Court (2010) 185 Cal.App.4th 208, 231 [California law “should be construed, whenever possible, to be in harmony with federal law”].)
In sum, imposing Unruh Act liability in situations such as the present risks considerable unintended harm. The effects of such a decision would echo not only throughout the advertising ecosystem, but throughout the internet ecosystem in general, where intermediaries might provide similar neutral tools that could run afoul of such a broad theory of liability. The result is advertising and online services that are less useful for consumers and advertisers alike.
Conclusion
In light of the foregoing, ICLE respectfully urges this court to grant the pending petition for review. Careful examination of trial court’s ruling will reveal that it strays beyond the Unruh Act’s purpose. The Unruh Act should not be read to prohibit legitimate and beneficial advertising based upon age.