Bipartisan SCAM Act would require online platforms to crack down on fraudulent ads

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Without meaningful deterrents, Big Tech companies will do what's profitable, regardless of the cost to consumers. But a new bipartisan bill could add a check that would make them think twice, at least in one area. On Wednesday, Senators Ruben Gallego (D-AZ) and Bernie Moreno (R-OH) introduced legislation that would require social platforms to crack down on scam ads.

The Safeguarding Consumers from Advertising Misconduct (SCAM) Act would require platforms to take reasonable steps to prevent fraudulent or deceptive ads that they profit from. If they don't, the Federal Trade Commission (FTC) and state attorneys general could take civil legal action against them.

The backdrop to the SCAM Act is a Reuters report from last November. Meta reportedly estimated that up to 10 percent of its 2024 revenue came from scam ads. The company is said to have calculated that as much as $16 billion of its revenue that year was from scams, including "fraudulent e-commerce and investment schemes, illegal online casinos and the sale of banned medical products."

Making matters worse, Meta reportedly refused to block small fraudsters until their ads were flagged at least eight times. Meanwhile, bigger spenders were said to have accrued at least 500 strikes without being removed. Executives reportedly wrestled with how to get the problem under control — but only without affecting the company’s bottom line. At one point, managers were told not to take any action that could cost Meta more than 0.15 percent of its total revenue. (See what I mean about needing meaningful deterrents?)

According to the FTC, Americans’ estimated total loss from fraud in 2024 (adjusted for underreporting) was nearly $19 billion. An estimated $81.5 billion of that came from seniors.

"If a company is making money from running ads on their site, it has a responsibility to make sure those ads aren't fraudulent," Sen. Gallego said in a statement. "This bipartisan bill will hold social media companies accountable and protect consumers' money online."

"It is critical that we protect American consumers from deceptive ads and shameless fraudsters who make millions taking advantage of legal loopholes," Moreno added. "We can't sit by while social media companies have business models that knowingly enable scams that target the American people."

This article originally appeared on Engadget at https://www.engadget.com/big-tech/bipartisan-scam-act-would-require-online-platforms-to-crack-down-on-fraudulent-ads-210316594.html?src=rss

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