Greg's Corner

Google Cleared of Liability in Gift Card Scams

By Greg Collier

A recent ruling underscores the complex legal landscape surrounding tech giants, gift cards, and consumer fraud. In a case reported by Ars Technica, a federal judge granted Google’s motion to dismiss a proposed class-action suit brought by Judy May, a consumer who fell victim to a prevalent form of fraud involving Google Play gift cards. Despite losing $1,000 to scammers in 2021, May’s claims were largely dismissed as the court found Google had no duty to refund her.

The details of the case highlight how scammers manipulate consumers, often using gift cards as a primary ‘currency’. Victims like May are typically tricked into purchasing these cards with promises of a prize or urgent financial need. In May’s case, scammers convinced her to purchase Google Play gift cards as an upfront cost to unlock a government grant. Upon realizing she’d been defrauded, May reached out to Google, only to be informed that refunds were not possible under Google’s terms of service, terms that she felt were ‘unconscionable’.

May’s complaint argued that Google is aware of the use of its gift cards in scams, pointing to data showing Google Play gift cards comprised a significant portion of reported scams from 2018 to 2021, with the Federal Trade Commission noting losses of over $17 million. She suggested that Google could take steps to warn customers, such as placing warnings on gift cards, but no such warning was provided.

In court, Google contended that it did not encourage or induce May to make the purchase; rather, the scammers did. The judge agreed, ruling that Google bore no liability since the economic harm May experienced stemmed directly from the scammers, not from any action by Google itself. May argued that Google indirectly profits from these scams by taking a 15 to 30 percent commission on gift card purchases within the Play Store, but this claim did not sway the court.

The judge noted that May had not used the gift cards “in their designed way” and that Google had no obligation to issue a refund, as May’s funds weren’t considered “stolen” when she made the purchase.

May also claimed that Google’s technology could potentially track and prevent transactions associated with scams. However, the court found that May failed to show any duty on Google’s part to investigate or prevent such activity, particularly in her case.

For victims like May, the ruling is a reminder of the limitations in pursuing refunds for gift card scams through legal channels. In cases where these cards are used fraudulently, it’s not uncommon for large companies to point to refund policies similar to those upheld by major retailers. Google, in this case, referenced policies from Target and Walmart, which also do not issue refunds in similar situations.

Often, gift card scam victims are left without recourse when companies decline to reimburse fraudulent transactions. While this case reinforces Google’s lack of liability, it also spotlights the vulnerability of consumers to scams exploiting loopholes in refund policies.

Consumers should be aware that gift cards are intended for personal use within the brand’s ecosystem, not as a payment method for debts, fines, or grants. Until systemic changes are made, consumers must stay vigilant, as tech companies may not be required to intervene or compensate for losses in these situations.