In an era where digital platforms increasingly dominate our daily lives, the battle against online fraud has reached a critical juncture. While tech giants reap immense profits, consumers often bear the brunt of deceptive advertising. However, a new bipartisan legislative effort seeks to shift that burden, compelling major online players to actively police the fraudulent ads that proliferate on their sites.
Congress Targets Big Tech’s Scam Ad Problem with Bipartisan SCAM Act
On Wednesday, Senators Ruben Gallego (D-AZ) and Bernie Moreno (R-OH) introduced the Safeguarding Consumers from Advertising Misconduct (SCAM) Act. This crucial piece of legislation aims to impose a long-overdue check on the unchecked profitability of fraudulent advertising, requiring social media platforms and other online entities to take “reasonable steps” to prevent deceptive ads from reaching their users.
The SCAM Act isn’t just a recommendation; it carries teeth. Should platforms fail to meet these new obligations, the Federal Trade Commission (FTC) and state attorneys general would be empowered to initiate civil legal action against them, introducing a significant deterrent where previously there was little.
The Alarming Scale of Online Fraud: A Lucrative Business for Platforms?
The impetus behind the SCAM Act is underscored by a disturbing Reuters report from last November, which cast a harsh light on the financial incentives driving the current landscape.
Meta’s Troubling Revenue Stream
According to the report, Meta, the parent company of Facebook and Instagram, reportedly estimated that a staggering 10 percent of its 2024 revenue—an estimated $16 billion—could be attributed to scam ads. This colossal sum allegedly stemmed from a range of illicit activities, including “fraudulent e-commerce and investment schemes, illegal online casinos, and the sale of banned medical products.” The sheer scale of this figure highlights a systemic issue where platforms inadvertently, or perhaps knowingly, become conduits for widespread deception.
A Reluctance to Act?
Even more concerning are the allegations that Meta exhibited a reluctance to aggressively tackle these fraudsters. Reports suggest that smaller scam operations were often ignored until their ads garnered at least eight flags. Larger advertisers, despite accumulating hundreds of “strikes,” reportedly remained active. Internal discussions within Meta allegedly grappled with controlling the problem, but always with a caveat: any action taken must not significantly impact the company’s bottom line. Managers were reportedly instructed to avoid measures that could cost Meta more than a mere 0.15 percent of its total revenue, a directive that speaks volumes about the prioritization of profit over consumer safety.
The Human Cost: Billions Lost to Scammers
The consequences of this lax oversight are profound and far-reaching. The FTC estimates that Americans lost nearly $19 billion to fraud in 2024 alone, a figure adjusted for underreporting. A particularly vulnerable demographic, seniors, accounted for an estimated $81.5 billion of that total, highlighting the devastating impact these scams have on individuals and families.
Bipartisan Push for Accountability
Both senators emphasized the urgent need for this legislation.
“If a company is making money from running ads on their site, it has a responsibility to make sure those ads aren’t fraudulent,” stated Sen. Gallego. “This bipartisan bill will hold social media companies accountable and protect consumers’ money online.”
Sen. Moreno echoed this sentiment, adding, “It is critical that we protect American consumers from deceptive ads and shameless fraudsters who make millions taking advantage of legal loopholes. We can’t sit by while social media companies have business models that knowingly enable scams that target the American people.”
The SCAM Act represents a crucial step towards reining in the digital Wild West, asserting that with great power—and profit—comes great responsibility. It’s a clear signal that lawmakers are no longer willing to allow Big Tech to prioritize revenue over the safety and financial well-being of its users.
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