The legal headwind against Facebook's owner Meta Platforms Inc (NASDAQ: FB) just got bigger with the Australian competition watchdog commencing court proceedings against the social media giant.
The Australian Competition and Consumer Commission (ACCC) said today it has instituted Federal Court proceedings alleging the company engaged in false, misleading, or deceptive conduct by running scam ads on Facebook featuring prominent Australian figures.
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Meta Platforms' fake celebrity ad scandal piling up
The ACCC's legal action follows criminal proceedings brought on by Andrew Forrest against Meta Platforms last month.
Forrest, the chairman of Fortescue Metals Group Limited (ASX: FMG), is taking Meta Platforms to court, claiming Facebook published ads using his identity to promote cryptocurrency scams.
While the ACCC is going after the US company for the same crime, its legal action is separate from that of Forrest.
How the Facebook scam was used
The competition regulator believes Meta Platforms' behaviour breaches Australian Consumer Law. It is also alleged that it could be in violation of the Australian Securities and Investments Commission Act.
The ads in question purportedly used high-profile Australians to endorse investments in cryptocurrency or money-making schemes without their consent or knowledge. These celebrities include businessman Dick Smith, TV presenter David Koch, and former NSW Premier Mike Baird.
The ads had links that took unsuspecting Facebook users to fake media articles. The articles included quotes from these public figures recommending the investment.
Is Meta Platforms responsible?
"The essence of our case is that Meta is responsible for these ads that it publishes on its platform," ACCC chairman Rod Sims said.
"It is a key part of Meta's business to enable advertisers to target users who are most likely to click on the link in an ad to visit the ad's landing page, using Facebook algorithms. Those visits to landing pages from ads generate substantial revenue for Facebook."
The ACCC alleges that Meta Platforms was aware these ads were scams but did not take sufficient action to stop them.
This is because these ads continued to appear on Facebook even after public figures around the world who appeared in the ads complained to Meta Platforms.
When something looks too good to be true
"We allege that the technology of Meta enabled these ads to be targeted to users most likely to engage with the ads, that Meta assured its users it would detect and prevent spam and promote safety on Facebook, but it failed to prevent the publication of other similar celebrity endorsement cryptocurrency scam ads on its pages or warn users," Sims added.
"Meta should have been doing more to detect and then remove false or misleading ads on Facebook, to prevent consumers from falling victim to ruthless scammers."
The ACCC is aware of at least one consumer who lost more than $650,000 due to the scams. The watchdog is seeking declarations, injunctions, penalties, costs, and other orders.
