Table of Contents
A new bipartisan bill, the Safeguarding Consumers from Advertising Misconduct Act—dubbed the SCAM Act—aims to hold social media companies accountable for the proliferation of fraudulent advertisements on their platforms. The legislation, introduced by Senators Ruben Gallego (D-AZ) and Bernie Moreno (R-OH), could lead to legal action from the Federal Trade Commission (FTC) and state attorneys general if platforms fail to adequately vet advertisers.
The escalating issue of online scams has prompted lawmakers to seek stronger measures against platforms that profit from deceptive practices. According to the bill’s sponsors, social media giants must be held responsible for enabling advertisements that victimize consumers.
The SCAM Act mandates that social media companies take “reasonable steps” to verify the legitimacy of advertisers and proactively prevent the dissemination of scam ads. This comes as scrutiny intensifies regarding the handling of fraudulent content, particularly on platforms like Meta.
Recent reports, citing internal Meta documents, suggest the company could generate as much as $16 billion in revenue in 2024 – approximately 10% of its total income – from advertisements promoting scams and illicit products. However, Meta has contested these figures, claiming they are overstated. This discrepancy underscores the lack of transparency surrounding ad revenue generated from questionable sources.
Relaxed Verification Policies Fuel Fraud
The bill highlights a concerning trend: some online platforms have reportedly loosened advertiser verification procedures in an effort to maximize profits. This relaxation, according to the legislation, has directly contributed to a surge in scam advertisements and the resulting financial losses for consumers.
“Platforms have a responsibility to protect their users, and that includes ensuring the advertisements they display are legitimate,” stated a senior official involved in the bill’s drafting.
Broad Support and Enforcement Mechanisms
The SCAM Act has garnered endorsements from prominent organizations including the American Bankers Association and AARP, signaling widespread concern over the issue. The legislation requires platforms to verify the government-issued identification or legal status of advertisers and to swiftly address reports of fraudulent activity.
Non-compliance with the SCAM Act would be considered a violation of the FTC’s existing rules against unfair or deceptive practices. States would also be empowered to pursue civil actions against platforms found in violation of the law.
Meta has acknowledged the challenges of combating scams, stating in a company release that while verification is not a foolproof solution, they actively collaborate with regulators worldwide and do not intentionally impede regulatory efforts.
The introduction of the SCAM Act represents a significant step toward holding social media companies accountable for the content displayed on their platforms and protecting consumers from the growing threat of online fraud.
