The county alleges fraudulent Facebook and Instagram ads are in breach of state false advertising laws
A lawsuit filed in Santa Clara County Court has accused Meta of knowingly tolerating scam advertising and fraudulent activity across Facebook and Instagram.
The complaint cites leaked internal documents which revealed Meta generated up to $7bn per year from ‘high-risk’ ads with signs of fraud and illegal gambling.
The lawsuit follows similar allegations from the Consumer Federation of America (CFA), a non-profit organisation, which also accuses Meta of failing to identify an “avalanche” of advertising messages. The CFA claims Meta exposed “billions of users to fraudulent e-commerce and investment schemes, illegal online casinos, and the sale of banned medical products”.
The latest filing, however, alleges Meta failed to clamp down on scam accounts and fraudulent ads which targeted users who had previously engaged with similar content.
“The scale of Meta’s misconduct has reached an extraordinary level, and it needs to stop,” Santa Clara county counsel Tony LoPresti told Reuters.
“We aggressively fight scams on and off our platforms because they’re not good for us or the people and businesses that rely on our services,” Meta said in a statement about the lawsuit. “We removed over 159 million scam ads last year alone, launched new tools to protect people, and partnered with law enforcement around the globe to disrupt these criminals. We will fight this lawsuit.”
According to the filing, Meta’s generative AI systems were found to assist fraudulent advertisers in creating scams, ushering in an ‘epidemic’ of middlemen who profit from selling accounts for ad placement, which were protected against enforcement.
“On information and belief, Meta can even adjust the flood of scam ads it allows on its platforms in order to smooth its earnings or hit specific revenue targets,” Santa Clara’s filing states.
Leaders take
Despite the tech firm’s public insistence that anti-scam efforts are a priority, scam and fraudulent ads run rampant on Facebook and Instagram; the leaked documents point to a hesitancy from Meta to cut itself off from this lucrative revenue stream, even at the expense of its own users.
From a brand protection perspective, a platform refusing to confront fraudulent advertisers on the required scale, arguably does not offer a sustainable advertising environment.
Consumers catch on quickly to fraudulent activity, and will likely soon lose trust in the platform, which will in turn taint the audience’s perception of the ads shown – and could even lead to consumers questioning the legitimacy of smaller or lesser-known brands without existing name recognition.
Although Meta is of course a popular and wide-reaching advertising platform, the continued rise of AI and ever-present power of Google gives advertisers viable alternatives to the platforms that don’t pose the same risks.
Digital advertising is the driving force behind Meta’s profit, with the company expecting to earn $240bn from ads in 2026. Meta may profit from the scam ads in the short term, but the potential damage to reputation on the platforms as well as the dissolving of trust from advertisers could see an implosion in its advertising model long-term if the issue is not effectively and transparently resolved.
