A pedestrian looks at her phone as she crosses a street in Encinitas, California, U.S., January 9, 2024. REUTERS/Mike Blake
Feb 4 (Reuters) - U.S. Senators Ruben Gallego and Bernie Moreno have introduced anti-scam legislation requiring social media platforms to vet their advertisers.
The bipartisan bill, called the Safeguarding Consumers from Advertising Misconduct Act, or the SCAM Act, would require social media platforms to take “reasonable steps” to combat fraudulent advertising or face legal action by the Federal Trade Commission and state attorneys general.
“We can’t sit by while social media companies have business models that knowingly enable scams that target the American people,” Moreno, a Republican from Ohio, said in a statement.
“If a company is making money from running ads on their site, it has a responsibility to make sure those ads aren't fraudulent,” said Gallego, a Democrat from Arizona.
A press release outlining the bill cited Reuters reporting in November that revealed how Meta Platforms – the owner of Facebook, Instagram and WhatsApp – expected to earn 10% of its 2024 revenue, or about $16 billion, from ads for scams and other illicit products, according to internal company documents. Following the story, U.S. Senators Josh Hawley and Richard Blumenthal asked the heads of the FTC and the Securities and Exchange Commission to probe Meta over illicit advertising on its platforms.
Meta has said that its internal statistics overestimated the proportion of its revenue that came from scams and other ads that violated its own safety rules.
“We aggressively fight fraud and scams because people on our platforms don’t want this content, legitimate advertisers don’t want it and we don’t want it either,” a Meta spokesman told Reuters last year.
The text of Gallego’s and Moreno’s bill states: “Some online platforms have abandoned tighter advertiser verification processes to avoid driving away profits from advertisers.” It notes that “online platforms have become a primary conduit for online scams or other digital advertising-related fraud.”
The legislation is endorsed by the American Bankers Association and consumer advocacy organizations, including the AARP. It would require social media platforms to verify government-issued identification of advertisers or the “legal existence” of businesses, as well as promptly review and act on reports of scams by users or government entities.
Non-compliance with the proposed legislation would be treated as a violation of the FTC’s prohibition of unfair or deceptive business practices. The bill authorizes state attorneys general to bring civil actions over alleged violations.
The legislation’s introduction comes amid what Meta has internally acknowledged is a global push by regulators to crack down on social media scams. Reuters reported in December that the company has developed a global “regulatory playbook” seeking to halt or delay advertiser verification regulations, according to internal Meta documents.
A Meta spokesman has said that such verification requirements were “not a silver bullet” and that the company works with regulators on anti-scam initiatives. He disputed that Meta has sought to stall or weaken regulations, and said the company’s work with regulators is just part of its broader efforts to reduce scams.
(Reporting by Jeff Horwitz in Oakland, California. Editing by Steve Stecklow and Michael Williams)
