Saying the parent company of Facebook and Instagram has “a serious problem,” one of northern California’s largest counties, together with trial lawyer partners, has headed to court against Meta in a bid to extract a payout and force the company to address an alleged overabundance of so-called “scam ads” on its platforms.
On May 11, Santa Clara County Counsel Tony LoPresti filed suit in Santa Clara County Superior Court. The lawsuit was filed on behalf of the people of California.
In a statement announcing the lawsuit, LoPresti said: “Meta’s platforms have become a preferred hunting ground for scammers, and our lawsuit alleges that Meta not only knows it, but has put in place systems and tools to ensure it profits from it.
“No corporation is above the law. As civil prosecutors in Silicon Valley, we cannot allow a tech company as powerful as Meta to continue perpetrating a worldwide scheme to deceive consumers.”
LoPresti’s office is joined in the action by attorneys with the firms of Bernstein Litowitz Berger & Grossman, of New York and Los Angeles; Bishop Partnoy, of San Francisco; and Renne Public Law Group, of Washington, D.C.
The lawsuit accuses Meta of allegedly violating California false advertising and consumer protection laws by allegedly doing too little to screen out fraudulent ads posted by alleged scammers, or even allegedly encouraging “scam ads” on its sites, allegedly generating $7 billion in revenue from such ads every year.
“Meta assures the public, and promises its users and advertisers, that it is making every effort to protect them from scams. But behind the scenes Meta is actively participating in the creation and targeting of scam ads, snuffing out attempts to combat scam ads, and in fact profiting from the scam ads it claims to be trying to prevent,” the lawsuit says.
The lawsuit, for instance, asserts Meta charges advertisers “it identifies as likely engaged in fraud” higher rates, “imposing a so-called ‘penalty bid’ for such advertisers” to use Meta’s advertising platform and A.I. ad creation tools.
The lawsuit asserts this practice, in turn, “drives up prices for legitimate advertisers,” while also “routinely displac(ing) legitmate ads.”
In response to the lawsuit, a Meta spokesperson said the company intends to fight the lawsuit, and released the following statement: “This claim relies on Reuters reporting that distorts our motives and ignores the full range of actions we take to combat scams every day. 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. 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.”
According to the lawsuit, 15 billion “scam ads” are posted to Facebook and Instagram every day, allegedly putting Facebook and Instagram at the heart of about one-third of all reported online scams.
Further, the lawsuit accuses Meta of allegedly cutting back on its efforts to detect and prevent “scam ads” on its platforms. The lawsuit asserts Meta particularly trimmed efforts aimed at detecting and preventing alleged fraud advertising originating from China, after the “successful efforts cut too deeply into Meta’s profits.”
According to the complaint, Meta has refused to take action even against certain advertisers identified through complaints as “the Scammiest Scammers.”
According to the complaint, Meta reportedly decided to continue to allow “scam ads” to allegedly proliferate on its platforms even after company leaders were advised it could cost “anticipated penalties of up to $1 billion.”
The company allegedly “concluded that ‘those fines would be much smaller than Meta’s revenue from scam ads.’”
The lawsuit seeks a court order requiring Meta to take action to prevent “scam ads.”
And it seeks unspecified damages, including potentially massive tripled civil penalties which are assessed per violation under California’s False Advertising Law and Unfair Competition Law, plus attorney fees.
“The factual record of misconduct in this case is extraordinary,” said attorney Avi Josefson, of the Bernstein Litowitz firm. “Meta doesn’t just fail to stop scam ads — it actively participates in creating them through its AI tools, profits from them through its ad auction system, and steers them toward the consumers most likely to be deceived. The evidence shows a company that had every tool at its disposal to protect the public and chose, again and again, to protect its bottom line instead.”
