FTC Demands Info from Tech Firms in Fight Against Ad Fraud

The Federal Trade Commission is cracking down on fraudulent tech advertising, which escalated substantially during the COVID-19 pandemic, issuing orders to eight social media and video streaming platforms seeking information on commercial practices that are deceptive or expose consumers to false health-care products, financial scams and counterfeit or fake goods. The action compels services including Meta Platforms’ Instagram, Alphabet’s YouTube, ByteDance’s TikTok and Amazon’s Twitch to provide answers in 45 days so the FTC can analyze their practices. In addition to fact-finding, the order is intended to pressure the companies to self-regulate.

Snap, Twitter and Pinterest were also included in the group, which the FTC Bureau of Consumer Protection director Samuel Levine said “has been a gold mine for scammers who tout sham products and other scams that have cost consumers enormously in recent years.”

In 2022 alone, consumers lost more than $1.2 billion to fraud that started on social media, more than any other contact method, according to FTC data. Among other things, the Commission is seeking information as to how the social media and video streaming companies ensure that consumers are able to distinguish commercial advertising and paid influencer posts from unpaid content.

“This study will help the FTC ensure that social media and video streaming companies are doing everything they can to keep scammers and deceptive ads off their platforms,” Levine said in the FTC announcement.

The orders also require the companies to report their ad revenue, the number of ad views, and other performance metrics, including for ads involving categories of products and services more prone to deception such as those intended to treat, prevent, cure substance use disorders or tout income opportunities.

“The FTC’s work has uncovered that major social-media and video streaming platforms have become a significant vector for misleading ads, financial scams and other types of fraud,” FTC chair Lina Khan said at an agency meeting at which the order was announced, according to The Wall Street Journal, citing a rise in reported consumer fraud cases to 11 percent in Q4 2022 from 4 percent in Q4 2019.

“Losses from social-media-based scams reported directly to the agency totaled $770 million in 2021, up from $105 million in 2019,” WSJ reports, noting that “the order is part of a long-term trend in which the FTC has asserted greater authority to fight deceptive marketing practices by investigating popular influencers and companies ranging from retailers to e-cigarette makers over allegations of false claims and improper disclosures.”

While Section 230 of the Communications Decency Act offers social platforms liability protection from material posted by third parties, the FTC has leeway under Section 5 of the FTC Act and can impose fines and penalties for those violations of the Act’s rules against false or misleading advertising.

No Comments Yet

You can be the first to comment!

Leave a comment

You must be logged in to post a comment.