ACCC sues Facebook Meta over Cryptocurrency Scam Ads

Australia's consumer law regulator, the Australian Competition and Consumer Commission (ACCC) has commenced Federal Court proceedings against Facebook (specifically, Meta Platforms, Inc. and Meta Platforms Ireland Limited). The proceeding centres around Facebook's alleged failure to prevent scam advertisements from running on the social media platform.

According to an ACCC media statement, Facebook is being pursued on the basis that it allegedly:

• engaged in false, misleading or deceptive conduct in breach of the Australian Consumer Law (ACL) and/or the ASIC Act (which regulates financial products and services); and
• aided, abetted, or was knowingly concerned in, the misleading and deceptive conduct of advertisers on its platforms.

The Australian Securities and Investments Commission's (ASIC) delegate is listed as a co-applicant with the ACCC in respect of the alleged contraventions of the ASIC Act.

The Australian Consumer Law

The ACL generally prohibits businesses from engaging in conduct that is misleading, deceptive or likely to mislead and deceive.

More specifically, traders are prohibited from making statements (or "representations") that are false or misleading in connection with supplies or potential supplies of goods and services.

The prohibition also extends to:

• false and misleading testimonials - where a trader falsely claims a representation is a testimonial, or falsely attributes a testimonial to a person; and
• false association - where a trader falsely represents that their business, goods or services have been approved, sponsored or endorsed by another person.

In the current case, it is alleged that the relevant advertisers used images of prominent Australians (and other international celebrities) such as Dick Smith, Andrew Forrest and David Koch in advertisements promoting cryptocurrency and investment products. Some of the advertisements are alleged to have linked to fake news articles purportedly published by popular Australian mastheads.

However, none of the celebrities or media outlets had formally approved the advertisements or been associated with the advertisers. Thus, the ads are claimed to have falsely attributed the celebrities' testimonial or endorsement, or associated themselves with the media outlets, as a means of deceiving consumers as to the legitimacy or credibility of the ads, in turn increasing their effectiveness.

The contents of the advertisements are also alleged to have promoted various financial products, which turned out to be scams. According to the ACCC, multiple consumers have been caught up in the scams - losing millions of dollars. It is claimed that one victim lost over $650,000, and the ACCC's Scamwatch service reports Australians lost over $99 million to cryptocurrency scams in 2021.

How can Facebook be liable for conduct of a third party?

It is acknowledged that Facebook is unlikely to have authored the advertisements in question. However, Facebook is claimed to have editorial and moderator controls over the content it allows to be published and advertised over its platforms.

A key argument from the ACCC is that Facebook failed to adopt appropriate measures to take down the false advertisements when notified, or prevent their publication in the first place (such as by using an algorithm to filter suspicious content for review). It is alleged that at least some of the celebrities repeatedly complained to Facebook but were not successful in having those complaints addressed. Meanwhile, Facebook allegedly continued to profit from revenue gained from its sale of advertising space on the platform.

In this failure, Facebook is alleged to have been complicit, or "knowingly concerned" in the conduct of the advertisers. Under the ACL, by failing to act when put on notice of the allegations of the unlawful conduct, Facebook may be statutorily liable as an accessory to that conduct.

These arguments have been run previously. Over a decade ago, the ACCC sued Google, under the then Trade Practices Act 1974, over similar claims. In that case, the ACCC argued Google was complicit in allowing false or misleading paid advertisements on its search engine advertising platforms. In 2013, the High Court of Australia unanimously ruled in Google's favour: finding that although Google acted as an intermediary in publishing the ads, it was not ultimately responsible for their content.

It remains to be seen whether similar reasoning will follow in the case against Facebook.

Key differences may include the nature of the ads as scams (rather than commercial advertisements) and the argument that Facebook allegedly allowed the ads to continue (or failed to remove and prevent them) despite being "put on notice" by multiple complainants.

Lessons for Businesses and Publishers

A key lesson from the proceedings is that businesses must take care to avoid engaging in misleading or deceptive conduct in all forms of advertising and commercial activity.

It should be borne in mind that conduct does not have to be intentional to fall afoul of the ACL provisions. While deliberate or reckless misconduct might attract heavier sanctions, mistakes or unintended missteps can also be caught.

In particular, the practice of garnering false reviews and testimonials for the purpose of artificially inflating reputation or deceiving consumers has been repeatedly called out as unethical, if not an unlawful contravention of the Australian Consumer Law. The ACCC has taken action against traders in the past on such instances.

Businesses should ensure that they only publish genuine endorsements and testimonials and obtain the approval of those providing them.

Affiliations with influencers or celebrities to provide testimonials, product reviews or endorsements should also be appropriately documented and monitored, and the sponsorship should be publicly disclosed where necessary.

Publishers of third-party content, including magazines, blogs, Facebook groups, websites and other media that allows third party content or sponsored advertisements, should ensure that they regularly review content for accuracy and respond appropriately to complaints received.

Adoption of transparent and robust acceptable content and complaints-handling policies, backed by enforceable contractual terms, are also of potential benefit in guarding against the possibility of adverse action.

Proactivity, attentiveness and vigilance on the part of the publisher is significant. Reckless indifference or 'turning a blind eye' to suspect conduct occurring on the publisher's watch is unlikely to be treated sympathetically.

Further Information

• ACCC Media Release: 'ACCC takes action over alleged misleading conduct by Meta for publishing scam celebrity crypto ads on Facebook' (18 March 2022; No. 33/22)
• Federal Court of Australia Case File Australian Competition and Consumer Commission & Anor v Meta Platforms, Inc. (Formerly Facebook, Inc.) & Anor (NSD188/2022)