Facebook Parent Sued Over Scam Ads by Australian Regulator

Meta said it has cooperated with the regulator’s investigation so far and intends to defend itself in court. The company says it uses technology to detect and block scam ads and tries to get ahead of scammers’ attempts to evade its detection systems.

“We don’t want ads seeking to scam people out of money or mislead people on Facebook,“ a spokesperson said. ”They violate our policies and are not good for our community.”

According to the Australian regulator, the ads had links that took Facebook users to a fake media article that included quotes from public figures endorsing a cryptocurrency or other moneymaking venture. Users were invited to sign up and subsequently pressured by scammers to deposit funds into the fake schemes, the regulator said. The ads included well-known Australians like businessman Dick Smith, television presenter David Koch and politician Mike Baird, the regulator said.

The regulator said Meta’s technology enabled the fake ads to target the users who were most likely to engage with them. When a user clicks the link in an ad and visits the ad’s landing page, those visits generate substantial revenue for Facebook, the regulator said.

In one instance, a person lost more than $450,000 due to a falsely advertised investment opportunity on Facebook, the regulator said.

“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,” commission Chair Rod Sims said. “The essence of our case is that Meta is responsible for these ads that it publishes on its platform.”

Meta could face millions of dollars in penalties if a court finds the company breached Australian consumer laws.

Meta has a review process to make sure ads that appear on Facebook comply with its advertising policies, the company has said. The review is largely automated, but it relies on employees to build and train the systems and in some cases ads are manually reviewed.

Meta has taken legal action against organizations or individuals who are responsible for similar scam ads. In 2020, Meta said one defendant provided so-called cloaking software and services designed to circumvent automated ad review systems. When ads are cloaked, an ad review system may see a website showing an everyday product, but a user will see a different website that promotes deceptive products and services, Meta said at the time.

Other public figures have had legal tussles with Facebook over scam ads. In early 2019, Facebook said it would donate $3.3 million to a project to fight scam ads in connection with the settlement of a lawsuit from

Martin Lewis,

a U.K. TV personality and the founder of MoneySavingExpert.com, a consumer-finance website. He sued the social media company for defamation over scam ads that used his name and image.

Meta has faced increased regulatory scrutiny all over the world after The Wall Street Journal published a series of articles, called The Facebook Files, that revealed harm caused by the social media company’s platforms and its challenges in addressing those issues.

Even before those articles were published, Australia had taken an aggressive stance in seeking to regulate big tech companies. Early last year, Australia’s parliament passed legislation that effectively requires the likes of Facebook and Google parent

Alphabet Inc.

to pay news publishers for content, a move that was watched by lawmakers in other countries.

More recently, Australia said it would introduce legislation to make social-media companies liable for defamatory comments published on their platforms, a move that risks exposing tech companies to lawsuits. It is also considering new data-privacy rules that could make it illegal for social media companies to direct children to harmful content.

News Corp

, owner of The Wall Street Journal, has a commercial agreement to supply news through Facebook.

—Stuart Condie contributed to this article.

Write to Mike Cherney at [email protected]