Fraud Surging on Social Media, FTC Warns; Opens Investigation
Social media a "gold mine for scammers who tout sham products," FTC charges
Social media and video streaming have become the Wild Wild West of fraud, chicanery and scams and the Federal Trade Commission is gearing up to restore order, ordering eight leading companies to explain what they're doing to police advertising.
“Social media has been a gold mine for scammers who tout sham products and other scams that have cost consumers enormously in recent years,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “This study will help the FTC ensure that social media and video streaming companies are doing everything they can to keep scammers and deceptive ads off their platforms.”
The agency has issued orders to eight social media and video streaming platforms seeking information on how these companies scrutinize and restrict paid commercial advertising that is deceptive or exposes consumers to fraudulent health-care products, financial scams, counterfeit and fake goods, or other fraud.
The orders, which the companies are required to comply with by law, were sent to: Meta Platforms, Inc.; Instagram, LLC; YouTube, LLC; TikTok, Inc.; Snap, Inc.; Twitter, Inc.; Pinterest, Inc.; and Twitch Interactive, Inc.
The amount of money consumers have reported losing to fraud that originated on social media platforms has skyrocketed since 2017. In 2022 alone, consumers reported losing more than $1.2 billion to fraud that started on social media, more than any other contact method, according to FTC data
The Commission also is seeking information about how the social media and video streaming companies ensure that consumers are able to identify commercial advertising on their platforms as advertising.
Standards and practices
The orders will collect information about the companies’ standards and policies related to paid commercial ads and their processes for screening and monitoring for compliance with those standards and policies, including through human review and the use of automated systems.
The orders also require the companies to report their ad revenue, the number of ad views, and other performance metrics, including for ads involving categories of products and services more prone to deception such as those intended to treat, prevent, or cure substance use disorders and tout income opportunities.
These orders will help the Commission better understand how prevalent deceptive advertising is on social media and video streaming platforms, the consumers who may be harmed by that advertising, and the effectiveness of the platforms’ oversight of advertisers, including whether the companies treat English-language and Spanish-language ads differently.
The study also should shed light on how the platforms create ads, including any use of generative artificial intelligence, and track, and classify ads, as well as the ad formats offered to advertisers, including shoppable ads, which allow consumers to purchase products or services directly through the ad, and virtual reality and other extended reality ads.
How are ads identified?
In addition, the Commission seeks information on how these platforms help consumers distinguish advertising and other commercial messages from other types of content, including disclosure tools for endorsers and influencers.
The orders seek information for the calendar years 2019 through 2023, which allows for the Commission to study relevant business conduct since the start of the COVID-19 pandemic. The orders were sent using the FTC’s 6(b) authority, which authorizes the Commission to conduct wide-ranging studies that do not have a specific law enforcement purpose.