Bipartisan SCAM Act would require online platforms to crack down on fraudulent ads
Without meaningful disincentives, big tech companies will do what is profitable, regardless of the cost to consumers. But a new bipartisan bill could add oversight that would make them think twice, at least in one area. On Wednesday, Senators Ruben Gallego (D-AZ) and Bernie Moreno (R-OH) introduced legislation that would force social platforms to crack down on fraudulent ads.
The Protecting Consumers from Advertising Abuse (SCAM) Act would require platforms to take reasonable steps to prevent fraudulent or misleading advertisements from which they profit. If they fail to do so, the Federal Trade Commission (FTC) and state attorneys general could file a civil suit against them.
Bill sponsors Ruben Gallego (left) and Bernie Moreno (Ruben Gallego (Bluesky) / Bernie Moreno)
The backdrop to the SCAM law is a Reuters report from last November. Meta reportedly estimated that up to 10% of its revenue in 2024 came from fraudulent advertising. The company reportedly calculated that as much as $16 billion of its revenue that year came from scams, including “fraudulent e-commerce and investment schemes, illegal online casinos, and the sale of banned medical products.”
Worse yet, Meta reportedly refused to block small-time scammers until their ads were reported at least eight times. Meanwhile, the biggest spenders are said to have racked up at least 500 warnings without being fired. Managers would have wondered how to control the problem, but without affecting the company’s results. At one point, executives were asked not to take any action that could cost Meta more than 0.15% of its total revenue. (See what I mean about needing meaningful deterrents?)
According to the FTC, Americans’ total estimated loss to fraud in 2024 (adjusted for underreporting) was nearly $19 billion. Of this sum, an estimated $81.5 billion came from seniors.
“If a company makes money by running ads on its site, it has a responsibility to ensure those ads are not fraudulent,” Senator Gallego said in a statement. “This bipartisan bill will hold social media companies accountable and protect consumers’ dollars online.”
“It is essential that we protect American consumers from misleading advertising and brazen fraudsters who make millions by taking advantage of legal loopholes,” Moreno added. “We cannot stand idly by while social media companies have business models that knowingly enable scams targeting the American people.”
