Seyfarth Synopsis: In a class action lawsuit alleging that Tinder discriminated on the basis of age in violation of California state laws by charging consumers age 30 and over a higher price for Tinder Plus subscriptions, the California Court of Appeal recently reversed the trial court’s judgment in favor of Tinder, holding there was no strong public policy that justified the allegedly discriminatory pricing model.
Businesses, especially those in the social media and technology sectors, should keep this ruling in mind when implementing marketing and pricing policies to avoid claims they are discriminating against potential classes of users based on protected demographics.
In Candelore v. Tinder, Inc., No. B270172, 2018 Cal. App. LEXIS 71 (Cal. App. Jan. 29, 2018), Plaintiff brought an action on behalf of himself and a putative class of California consumers who were over 30 years old when they subscribed to Tinder Plus, asserting age discrimination in violation of two state laws, including the Unruh Civil Rights Act and the Unfair Competition Law (“UCL”). Specifically, Plaintiff alleged that Tinder charged consumers over the age of 30 $19.99 per month for Tinder Plus, while it charged consumers under the age of 30 only $9.99 or $14.99 per month for the Tinder Plus features.
The Trial Court’s Decision
Tinder moved to dismiss the action in the trial court on the basis that Plaintiff failed to state a claim because: (1) age-based pricing does not “implicate the irrational, invidious stereotypes” that the Unruh Act was intended to proscribe; (2) a public statement by Tinder’s executive, as quoted in the complaint, “refute[d] any notion that the alleged discrimination in pricing [was] arbitrary”; and (3) age-based pricing was neither “unlawful” nor “unfair” under the UCL. Id. at *4.
The trial court agreed with Tinder and entered judgment in its favor, holding that Tinder’s age-based pricing practice did not constitute arbitrary or invidious discrimination because it was reasonably based on market testing showing “younger users” are “more budget constrained” than older users “and need a lower price to pull the trigger.” Id. at *2-3. The trial court reasoned that there was “no basis in the published decisions for applying the Unruh Act to age-based pricing differentials” and that Tinder’s pricing structure furthered the public policies of increasing access to services for the general public and maximizing profit by the vendor, a legitimate goal in our capitalistic economy.” Id. at *4-5. Based on these rulings, the trial court concluded that Plaintiff could note state a claim for discrimination under the Unruh Act. Because the discrimination claim formed the basis for the Plaintiff’s UCL claims, the trial court similarly dismissed those claims. Id.
Plaintiff appealed to the California Court of Appeal..
The Court of Appeal’s Decision
The Court of Appeal reversed the trial court’s ruling in favor of Tinder, holding that “[a] blanket, class-based pricing model like this, when based upon a personal characteristic such as age, constitutes prohibited arbitrary discrimination under the Unruh Act.” Id. at *12. In doing so, the Court of Appeal departed from guidance in (and other authority embracing) the California Supreme Court’s opinion in Koire v. Metro Car Wash, 40 Cal. 3d 24, 29 (1985), which held that age can serve as a reasonable proxy for income. Id. at *12-13. The Court of Appeal characterized the Supreme Court’s statements in Koire as dicta and declined to adopt the reasoning, holding that that “discrimination based on generalized assumptions about an individual’s personal characteristics are ‘arbitrary’ under the Act.”
The Court of Appeal also rejected the trial court’s conclusion that Tinder’s alleged age-based pricing model was justified by public policies. Id. at *19-20. Also relying on Koire, the Court of Appeal held that “a merchant’s interest in profit maximization” cannot justify discriminatory pricing “based on an individual’s personal characteristics.” Id. at *22-23 (emphasis in original). Nevertheless, the Court of Appeal opined that a business like Tinder could employ “rational economic distinctions to broaden its user base and increase profitability,” so long as those distinctions are “drawn in such a way that they could conceivably be met by any customer, regardless of the customer’s age or other personal characteristics.” Id. at *23 (emphasis in original; citations omitted). Offering its own solution, the Court of Appeal suggested that Tinder “could establish different membership levels for its Tinder Plus service that would allow more budget constrained customers, regardless of age, to access certain premium features at a lower price, while offering additional features to those less budget conscious users who are willing to pay more.” Id.
Accordingly, the Court of Appeal concluded that the Complaint’s allegations were sufficient to state a claim for age discrimination in violation of the Unruh Act. Id. at *24. Based on this finding and because the standard for finding an “unfair” practice in a consumer action is intentionally broad, the Court of Appeal also held that Plaintiff sufficiently alleged a claim for violation of the UCL. Id. at *24-25.
Implications For Employers
While most businesses contemplate age discrimination claims in the hiring context, this ruling illustrates that companies can be vulnerable to class action litigation if their products or services can be perceived as giving preferential or detrimental treatment to certain consumers based on an individual’s personal, protected characteristics. Companies should be cautious if their business decisions — whether it be in the context of hiring, pricing, or any other strategic considerations — could potentially have (or be perceived to have) an adverse impact on a class of people based on their demographics.