Google defeats gift card fraud lawsuit

A federal judge has dismissed a proposed class action lawsuit against Google, ruling that the technology giant has no legal obligation to refund victims of gift card scams.

U.S. district judge Beth Labson Freeman ruled that Indiana resident Judy May, who lost $1,000 in a gift card scam, suffered losses due to third-party fraudsters rather than any misconduct by Google.

May fell victim to the scam in April 2021 when a fraudster, impersonating a relative, directed her to contact someone claiming to be a government agent. The scammer promised she would receive federal grant money if she purchased Google Play gift cards and provided the codes on the back to cover supposed upfront costs.

In her lawsuit, May argued that Google should have provided adequate warnings about potential scams on gift card packaging. She also challenged Google’s practice of retaining 15 to 30 per cent commission on purchases made with stolen gift cards.

However, judge Freeman determined that “May suffered economic harm because of third-party scammers’ fraudulent inducement, not Google’s omission or misrepresentation.” The judge also noted that May had not used the gift cards “in their designed way.”

The ruling comes amid growing concerns about gift card fraud in the United States. According to the Federal Trade Commission, Americans lost $217 million to gift card and reload card fraud in 2023, with Google Play cards accounting for approximately 20 per cent of all gift card scams based on 2021 data.

Judge Freeman’s decision allows May to refile some claims within 45 days, though she dismissed a claim seeking triple damages, noting that May was unlikely to fall victim to such scams again “given her awareness of such scams.”