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Consumer watchdog commences misleading or deceptive action against Facebook over online scams

23 March 2022

#Technology, Media & Telecommunications

Consumer watchdog commences misleading or deceptive action against Facebook over online scams

On 18 March 2022, outgoing Chair of the Australian Competition & Consumer Commission (ACCC) Rod Sims announced the agency had commenced “world-first” proceedings against the owners of Facebook, Meta Platforms Inc and Meta Platforms Ireland Limited (Meta). 

The proceedings

The proceedings relate to misleading advertisements published by Meta on Facebook. These ads used fake celebrity endorsements from well-known public figures such as retailer Dick Smith, presenter David Koch and former NSW premier Mike Baird to promote investment opportunities in cryptocurrency. The ads linked Facebook users to fake news articles and encouraged them to register their details, following which they were subjected to high-pressure sales tactics from scammers to convince them to invest in fake schemes. Crypto scams are estimated to have tricked Australians out of almost $100 million in 2021 alone.

The proceedings allege that:

  • Meta engaged in false, misleading or deceptive conduct by publishing scam advertisements featuring prominent Australian public figures
  • Meta aided and abetted or was knowingly concerned in false or misleading conduct and representations by the advertisers

in breach of the Australian Consumer Law (ACL) or the Australian Securities and Investments Commission Act (ASIC Act). 

The ACCC considers that Meta failed to prevent the publication of the misleading advertisements, despite receiving complaints, and that its behavioural ad technology targeted these ads at those most likely to respond to them, despite Meta having “assured its users it would detect and prevent spam and promote safety on Facebook”. Meta generates substantial revenue from selling ads and ad-clicks on its platforms.

The regulatory landscape

Under the ACL, a person is prohibited from engaging in conduct that is or is likely to be misleading or deceptive. There are also prohibitions on making false or misleading representations in connection with the supply of goods or services, including representations that: (i) purport to be a testimonial by any person relating to goods or services or (ii) representations that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits. Liability can arise where a person is involved in certain of these contraventions.

To the extent the conduct is taken to involve financial services, which are carved out from the ACL, the ASIC Act may apply instead.

What does this mean for social media platforms?

The proceedings are another step towards encouraging social media companies to take on more responsibility for the content circulated on their platforms. Announcing the proceedings on his last day as ACCC Chair after 11 years, Rod Sims said the “essence of our case is that Meta is responsible for these ads that it publishes on its platform”. If successful, social media companies may need to rethink their approach to the advertising they accept for placement on their platforms, and the extent to which they apply their own technology to profile, target and match users and advertisers. 

In the past, online platforms have argued they are not responsible for vetting the ad content published on their platforms, with their service being akin to a newspaper that merely publishes a classified ad. The difference here may be the active role played by Meta in profiling and targeting its users.

One to watch

The proceedings follow deceptive conduct in the digital economy being flagged in the ACCC’s March release of its annual enforcement priorities and continuing developments in the area of ACL with a review of the unfair contracts regime currently underway. In his final speech as Chair, Rod Sims made clear that “what the ACCC wants to hear about…is whether and what sort of up-front rules may be needed in relation to consumer law issues [including] what should be required of platforms so that users are protected against online scams or malicious apps”.

It is expected the Meta will defend the proceedings.

The ACCC proceedings come hot on the heels of criminal proceedings commenced against Meta by Dr Andrew (Twiggy) Forrest in February 2022, after his image was repeatedy used by the scammers on Facebook. The cases stem from similar facts, but will address different issues of law. They also follow a 2021 decision of the High Court that administrators of public social media pages could be considered as “publishers” of third party comments posted on their page and therefore at risk of liability under defamation law.[1]

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Author: Georgia Milne

[1] Fairfax Media Publications Pty Ltd v Voller; Nationwide News Pty Limited v Voller; Australian News Channel Pty Ltd v Voller [2021] HCA 27

The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

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