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From Antitrust Law Daily, October 7, 2013

Skype may be liable under California law for misrepresenting service terms

By Jody Coultas, J.D.

A Skype user stated California Unfair Competition Law (UCL), False Advertising Law (FAL), and Consumers Legal Remedies Act (CLRA) claims against Skype, Inc. for allegedly misrepresenting the terms of its voice over Internet protocol service, a California appellate court has held (Chapman v. Skype, Inc., October 4, 2013, Croskey, H.).

The user purchased a subscription to the “Unlimited US & Canada” calling plan, thinking that there was no limit on either the number of minutes that she could use or the number of calls that she could make for a fixed monthly fee. The user did not notice the language “fair usage policy” at the bottom of the Internet page and did not read the policy, and was charged overage fees when her use exceeded the limits. The user alleged that Skype advertises its voice over Internet protocol calling plans as “Unlimited” when, in fact, the plans were limited as to the number of minutes per day and month and the number of calls per day in violation of the UCL and CLRA.

A trial court held law that the user failed to adequately allege an unfair, fraudulent, or unlawful business act or practice, or that Skype had not clearly disclosed the terms of its usage. The trial court also held that although the user was a consumer under the CLRA, the service representations were not unfair or deceptive.

A trier of fact could reasonably conclude that consumers were likely to believe that Skype’s “Unlimited US & Canada” calling plan offered unlimited calling within the United States and Canada for a fixed monthly fee and would fail to notice the disclosure to the contrary in the fair usage policy, according to the court. A reasonable interpretation of the words “fair usage policy” was that the policy protected against misuse of the services provided. The words did not necessarily suggest to an ordinary consumer that the “Unlimited” plan was actually limited as to the number of minutes and number of calls. A reasonable consumer might not follow the link attached to the “fair usage policy” term to learn the details of those limits. Therefore, the trial court erred in sustaining the demurrer to the UCL and FAL claims.

The user also adequately alleged reliance under the UCL and FAL, according to the court. To state a claim under the UCL or FAL, a plaintiff must allege an economic injury caused by his or her reliance on the truth and accuracy of the defendant’s representations. Actual reliance, or causation, may be inferred from the misrepresentation of a material fact. The materiality of Skype’s alleged representation was a question of fact that could not be decided as a question of law on this record.

Whether a reasonable consumer was likely to be deceived by the representation that the calling plan was “Unlimited” was a question of fact, according to the court. Therefore, the user adequately alleged deceptive advertising for purposes of the CLRA and that the sustaining of the demurrer on this basis was error.

The case is No. B241398.

Attorneys: James K. Kawahito (Kawahito Shraga & Westrick LLP) for Melissa Chapman. Michael A. Sherman (Bingham McCutchen LLP) for Skype, Inc.

Companies: Skype, Inc.

MainStory: TopStory Advertising StateUnfairTradePractices CaliforniaNews

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