Zynga and Facebook hit with class action over CPA deals

It appears that the Scamville saga continues to hurt the reputation of the major social game developers Zynga with legal news site Findlaw reporting Zynga and Facebook too have been filed with a class action.

Lead plaintiff, Rebecca Swift, claims that she was fleeced of over $200 responding to offers of an I.Q test and green tea in exchange for in game credits of leading Zynga game YoVille. Zynga has previously repented somewhat for these kinds of offers, but it remains unclear what liability they will exposed to on this.

USA today reporting on the issue made an interesting point on ethics underpinning the class action:

There is no governing body to specifically regulate the social-gaming industry, which puts the onus on developers to police themselves, says Steinberg of Digital Trends. “It comes down to a question of ethics,” he says.

prizeKing has spoken previously about Zynga and their CPA deals. We at prizeking believe that providing a better value prosition for virtual currency users in the form of loyalty incentives would go a long way to avoiding the reputational nightmare that a “class action” can bring.

See Findlaw’s full legal post below or you can read it here

Game On: Lawsuit Takes on Social Gaming Ads

Filed in district court in San Francisco, the suit details how plaintiffs, to get to new gaming levels, sign up for the so-called “special offers.” Some of those offers, such as an IQ test and green tea offer that Swift agreed to, automatically charge the game player. Game provider Zynga seems to be taking the issue seriously, but may not be doing enough to appease consumers who have already lost money. In a November 2nd post on his blog, Zynga CEO Mark Pincus acknowledged problems with “…’scammy’ advertisers and the bad user experience they create. I agree…that some of these offers misrepresent and hurt our industry.”Too little, too late?

In addition, last month Facebook temporarily suspended one of Zynga’s new games, FishVille, while it investigated whether ads in the game violated the network’s advertising guidelines. It seems both these actions indicate that the companies agree there is a real problem. Who actually may be responsible for it may take more time to sort out.

As the suit makes its way through the courts, it is best for consumers to be careful when looking at the special offers linked to social gaming on Facebook, MySpace and other sites. Although the Federal Trade Commission is charged with overseeing much of e-commerce, analyst Scott Steinberg tells USA Today that there is no governing body to specifically regulate the social-gaming industry, which puts the onus on developers to police themselves. “It comes down to a question of ethics.” And at this time, the FTC is aware of the lawsuit but had no further comment.

This suit may well disappear quickly. Zynga is looking at a possible IPO sometime next year. A class action suit on the books could seriously effect the stock price, and that would be game over for company execs.