The ‘click fraud’ legal battle between ad tech giant Criteo and rival SteelHouse just got messier

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SteelHouse CEO Mark Douglas.
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Gary Miller/Getty Images

US-based ad tech firm SteelHouse has responded to a lawsuit from rival company Criteo that alleged it ran a “counterfeit click fraud scheme” by filing counterclaims of its own.

Last month, Criteo, the French public ad tech company, accused SteelHouse of counterfeiting clicks to “trick e-tailers into attributing sales to SteelHouse that should have been attributed to Criteo” and other competitors.

SteelHouse denied these claims and suggested the suit was an attempt by Criteo, a large public ad tech firm that generated more than $1 billion in revenue last year, to “bully a smaller company.”

Now, in a countersuit filed in a California court on Tuesday (which you can read in full below), SteelHouse accuses Criteo of false advertising, intentional interference with a contract, intentional interference with prospective economic advantage, and unfair competition.

The ‘retargeting’ battle

Both companies compete in the “retargeting” space, in which ad tech platforms drop cookies on users’ browsers when they visit a website – usually an ecommerce website. When the user visits other websites, the publisher can offer that ecommerce company the chance to purchase ad space targeting that user, which will hopefully result in that person returning to the ecommerce site and making a purchase.

Criteo uses a pay-per-click pricing model, which means it only generates revenue when users click on the ads it has served. The amount it can charge advertisers depends on their conversion rates (how many people who saw the ad clicked on it) and by measuring whether the ads served resulted in sales.

SteelHouse claims its “unique business model,” which does not focus purely on clicks, has helped it gained market share from Criteo in recent years. That resulted in Criteo resorting to “gamesmanship” in order to win back customers, in the form of “artificially high and manufactured click count numbers,” the suit alleges.

The more clicks, the more Criteo can charge – and “inflated” click rates have resulted in Criteo diverting customers and potential customers from SteelHouse, the suit claims.

Criteo initially told Business Insider, “we do not comment on ongoing legal investigations and as such will be making no further comment on this matter.”

Criteo later sent Business Insider this statement:

“On June 13th, Criteo (NASDAQ: CRTO), filed a complaint for damages and injunctive relief against Steelhouse in the Central District of California, followed on July 1st, by a motion for preliminary injunction. In its complaint, Criteo alleges that Steelhouse perpetrated a counterfeit click fraud scheme in its business operations, and false and misleading advertising related to such conduct. Steelhouse filed its response to Criteo’s complaint on July 25th. Steelhouse’s response, along with its alleged counterclaims, are utterly baseless and nothing more than an attempt by Steelhouse to deflect attention away from its own misconduct. Criteo will continue to vigorously prosecute its claims against Steelhouse.”

SteelHouse claims Criteo ‘injects adware’

SteelHouse accuses Criteo of some pretty underhand behavior in the suit.

Criteo “regularly injects adware” – malicious software – into users’ personal computers, serves ad impressions through that adware, and buys inventory from “non-reputable sources” in order to drive up its click numbers, the SteelHouse filing claims.

The SteelHouse claim also includes this chart to show how Criteo claims it has the highest click rate in the industry, outperforming its competitors – even market leaders Google and Facebook – by more than 400%.

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Latham Watkins LLP

The filing alleges “more than half (52%) of Criteo’s clicks have no attributable source. None. Put simply, more than half of the claimed clicks do not originate from any known website or publisher.”

SteelHouse came to this conclusion after examining the web logs and tracking pixels of three customers it shares with Criteo. The implication is that Criteo is somehow falsely enhancing its click count.

SteelHouse’s countersuit also alleges Criteo is generating fake clicks after a customer buys a product. Usually advertising systems are designed to stop serving customers an ad after they have made a purchase, but the suit alleges “up to 8%” of Criteo’s clicks occur after a purchase has been made – which would be little to no use to the retailer, but would generate Criteo more revenue.

Not only this, but SteelHouse claims the clicks often appear in “clusters” – where Criteo’s clicks are coming from users clicking ads from the same advertiser in rapid succession. SteelHouse alleges in the suit that 16% of Criteo’s clicks are from users clicking the same ads within a 30-minute period, which it says is eight times the industry standard. The suit implies that Criteo is artificially creating these clicks.

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Criteo CEO Eric Eichmann.
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Criteo

The suit also alleges Criteo made “false, misleading, and malicious statements about SteelHouse, directly to its customers, prior to the filing of the lawsuit,” which SteelHouse claims resulted in a loss of clients, revenue, and damage to its reputation and the perception of “the ad tech industry as a whole.”

On one occasion in May, according to the filing, a Criteo employee allegedly sent a SteelHouse client an email describing SteelHouse as “hairy” and accusing the firm of “inflated click and post-click volumes.”

The suit claims SteelHouse has lost more than 25 customers who informed the company the end of their relationship was “directly a result of Criteo’s accusations about SteelHouse’s conduct.”

SteelHouse is seeking actual, punitive, treble, and compensatory damages, attorneys’ fees, as well as preliminary and permanent injunctions prohibiting Criteo from, according to the suit:

    “Falsely attributing clicks with no attributable source.””Falsely attributing clicks that occur after a consumer has purchased a product from a website and engaging in ‘cluster click counting’.””Engaging in other conduct designed to artificially inflate its click count numbers.””Disparaging SteelHouse, its officers, agents, servants, employees, attorneys, and any other person who are acting in concert or participation with them, its services, or its products to actual and potential clients, consumers, or competitors.”

The case continues. Criteo’s share price was down 4.07% at the time of writing.

Read the suit in full:

Criteo Vs SteelHouse byLara on Scribd

Criteo Vs SteelHouseLara