Report from MediaPost
In Brief – Rhode Island is suing Meta, alleging that the company helped create and optimize fraudulent advertisements and ads for illegal products while misleading the public about its efforts to combat scams. The complaint, filed in Providence County Superior Court, claims Meta violated state consumer protection law by misrepresenting its ability to detect, prevent, remove and suppress fraudulent and illegal activity on its platforms. It also alleges Meta knowingly tolerated millions of fake accounts to protect advertising revenue and maintain an appearance of continued growth. According to the lawsuit, scammers used these accounts to make fraudulent ads appear legitimate and increase their distribution through Meta’s algorithms.
Context – Legal regimes protecting platforms from being responsible for the actions of their many users have been a foundation of the digital economy. The key principle has been that the people that engage in harmful conduct are responsible, not the intermediary services they use. The scope of the hosting provider liability regime in Europe, and the Sec. 230 immunity regime in the US, are now threatened by court rulings aligned with arguments that algorithmic processes to direct content to users nullify a platform’s immunity from liability for user conduct. The US Federal Trade Commission has proposed a rulemaking process to require online platforms to combat some fraudulent ads and questioned whether platform tools to generate and target ads may fall outside Sec. 230. In June, the EU’s Court of Justice ruled that a platform using algorithms to determine how users receive information cannot be classified as a passive hosting provider, and a German court recently used that ruling to determine that Meta is responsible for scam investment ads. In 2023’s Gonzalez v Google, the US Supreme Court was teed up to address the question of whether platforms using algorithms to direct content nullifies their Sec. 230 immunity, but they dispensed with the case without addressing it, and a further circuit split has emerged. The RI lawsuit is also an expansion of the increasingly successful use of state consumer protection law to penalize reputationally damaged social media.