California's Santa Clara County has filed a lawsuit against Meta Platforms, accusing the social media giant of profiting from illegal scam advertisements on Facebook and Instagram, in violation of the state's false advertising and unfair business practices laws.
Lawsuit Details and Allegations
The lawsuit, lodged on Monday in Santa Clara County Superior Court on behalf of all California residents, alleges that Meta tolerated fraudulent advertising on a global scale. It seeks restitution, civil damages, and an injunction prohibiting Meta from engaging in unfair business practices. Citing leaked internal documents first reported by Reuters last year, the complaint claims Meta earned up to $7 billion in annual revenue from so-called 'high-risk' scam ads that exhibit clear signs of fraud.
The county contends that instead of implementing a broad crackdown on fraudulent advertisers, Meta largely condoned the misconduct and even established 'guardrails' to impede scam reduction efforts if they proved too costly for the company.
Meta's Response
Meta has stated its intention to defend against the claim. A spokesperson, Andy Stone, said, 'This claim relies on Reuters reporting that distorts our motives and ignores the full range of actions we take to combat scams every day. We aggressively fight scams on and off our platforms because they're not good for us or the people and businesses that rely on our services.'
Allegations of Systemic Fraud
In the suit, Santa Clara alleges that Meta materially contributed to an epidemic of fraud by allowing middlemen to sell accounts for placing ads that were protected against enforcement, and by targeting scam ads at users who had previously clicked on similarly bogus offerings. Citing Reuters' testing, the county alleged that Meta's generative artificial intelligence systems often assist unethical marketers in creating ads for scams.
'The scale of Meta's misconduct has reached an extraordinary level, and it needs to stop,' county counsel Tony LoPresti told Reuters. 'As civil prosecutors in Silicon Valley, we have a special duty to hold tech companies accountable to the law.'
Deception and Profit Motives
The complaint seizes on Meta's reassurances of its anti-scam efforts as a component of its alleged misconduct. By assuring users that anti-scam efforts are a top priority and that it rigorously reviews ads for policy violations, the county says, Meta deceived the public and concealed the extent to which bogus ads have boosted its profits. 'On information and belief, Meta can even adjust the flood of scam ads it allows on its platforms in order to smooth its earnings or hit specific revenue targets,' the filing states.
Legal Representation
To assist in the suit, Santa Clara's county counsel is working with three outside law firms: Bernstein, Litowitz, Berger and Grossmann; Renne Public Law Group; and Bishop Partnoy. However, the county will retain full control over case decisions, and the firms will only be paid if the county wins, LoPresti said.
