Without meaningful disruptions, Big Tech companies will do what is profitable, regardless of the cost to consumers. But a new bipartisan bill could add controls that will make them think twice in at least 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 Protection of Consumers from Advertising Misconduct (SCAM) Act will require platforms to take reasonable steps to prevent fraudulent or misleading advertisements from which they profit. If they do not do so, the Federal Trade Commission (FTC) and state attorneys general can take civil legal action against them.
The background of 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 more than $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 unless their ads were flagged at least eight times. Meanwhile, big spenders were said to have earned at least 500 strikes without being removed. Executives reportedly scrambled over how to control the problem — but only without affecting the company’s bottom line. At one point, managers were told not to take any action that would cause Meta to lose more than 0.15 percent of its total revenue. (See what I mean about needing meaningful deterrents?)
According to the FTC, the estimated total loss for Americans from fraud in 2024 (adjusted for underreporting) was approximately $19 billion. An estimated $81.5 billion of this came from seniors.
“If a company is making money by running ads on its site, it has a responsibility to make sure those ads are not fraudulent,” Senator Gallego said in a statement. “This bipartisan bill will hold social media companies accountable and protect consumers’ money online.”
“It is vital that we protect American consumers from misleading advertising and shameless fraudsters who make millions by exploiting legal loopholes,” Moreno said. “We cannot sit by while social media companies have business models that knowingly enable scams that target the American people.”
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