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"Far from an honest mistake": Facebook accused of inflating ad data

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Advertisers in a class action lawsuit against Facebook say the social media giant committed fraud, knowingly inflating the amount of time users viewed videos by as much as 900 percent for more than a year, causing businesses to spend more on ads than they otherwise would have.

The allegations, which were first reported by The Wall Street Journal, arose in a filing unsealed Tuesday in northern California federal court. The small advertisers say the company's skewed numbers gave it an unfair advantage over its competitors, such as YouTube, LinkedIn and Twitter.

The advertisers initially filed a lawsuit claiming Facebook engaged in unfair business practices in 2016. But after receiving tens of thousands of documents from Facebook in relation to the case, they amended their complaint to accuse the company of fraud.

Facebook acknowledged in September 2016 that its video metrics had been mistakenly inflated by between 60 and 80 percent, but the advertisers claim Facebook's internal records show it "was far from an honest mistake." According to the lawsuit, the social media giant had in fact been misreporting numbers by "by some 150 to 900 percent."

"Facebook engineers knew exactly how the company was calculating its averages but did nothing about it for over a year," lawyers for the advertisers wrote in the suit. "Facebook ignored reports from advertisers of aberrant results caused by Facebook's method of calculation."

In an email to CBS News, a Facebook spokesperson disputed the advertisers' allegations.

"This lawsuit is without merit and we've filed a motion to dismiss these claims of fraud. Suggestions that we in any way tried to hide this issue from our partners are false. We told our customers about the error when we discovered it — and updated our help center to explain the issue," the spokesperson wrote, noting that the company has since implemented new measures to detect issues in its metrics reporting.

Robert Eglet, whose Las Vegas-based law firm Eglet Prince represents the social media marketing agency LLE One in the suit, countered Facebook's statement in a Wednesday afternoon phone call with CBS News.

"I think the documents that we've unearthed pretty much refute that claim completely," Eglet said. "I mean that's just completely false."

Eglet said the internal documents reviewed by his firm show Facebook employees ranging from engineers to "high-level" staff were aware of the inaccurate metrics before the company's announcement. He said the advertisers' law firm is planning to seek depositions from Facebook employees.

"We do plan on deposing executive-level people," Eglet said.

The advertisers cited internal documents in claiming that a Facebook engineering manager wrote in a June 2016 email that "somehow there was no progress on the task for a year," referring to the inflated metrics.

In the meantime, the advertiser claim the company deployed a "'no PR" strategy to "obfuscate the fact that we screwed up the math."

That alleged obfuscation came at a time when the company's CEO and founder Mark Zuckerberg was particularly focused on the success of its video services, said Jason Kint, chief executive officer of the online publisher trade organization Digital Content Next.

"Facebook was attempting to enter the video marketplace. At the the time Mark Zuckerberg said video was the number one priority for the company," Kint said.

Kint's organization had notified Facebook it intended to file an amicus brief in support of unsealing the fraud allegations shortly before the company told the court on Oct. 4 that it would no longer demand they be kept private, he said.

The advertisers allege the fraud took place at a time when Facebook was beset by a series of public embarrassments related to fake users and flawed metrics on the social network. 

In December 2016, the company announced that it undercounted the traffic of some publishers and for more than a year over-reported time spent on Facebook's Instant Articles platform. It acknowledged issues affecting a range of metrics -- including ad reach, streaming reactions, likes and shares. 

And a scathing report on "disinformation and fake news" released in July by a U.K. Parliament committee called for increased oversight of social media companies and election campaign, citing "scraped" Facebook data used by companies associated with the successful "Brexit" campaigns and President Trump's 2016 run. The report said there was "a continual reluctance on the part of Facebook to conduct its own research on whether its organization has been used by Russia to influence others."

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