Report from MediaPost
In Brief – The Federal Trade Commission has issued an advanced notice of proposed rulemaking seeking public comment on the agency possibly issuing regulations that could require online platforms to take steps to combat fraudulent ads. The FTC said sophisticated scams use the same advertising and targeting tools platforms provide to legitimate businesses, and that the giant platforms help amplify these scams while avoiding the costs associated with the frauds. Potential rules could require platforms to verify advertisers’ identities before providing ad-optimization tools and to monitor ads. The FTC acknowledged that online platforms are ordinarily not responsible for third party content due to Sec. 230 but noted that platform tools are often used to generate and target ad content and the Commission “may exercise its authority to protect consumers from such conduct” if it falls outside Sec. 230.
Context – Legal regimes protecting digital platforms from being responsible for the actions of their many users have been a foundation of the digital platform economy. The key legal 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 under threat from court rulings that are sympathetic to arguments that algorithmic processes to direct content to users nullify a platform’s immunity from liability for user conduct. In June, the EU’s Court of Justice ruled that a platform using algorithms to determine how and in what order user information is displayed 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 posted by third parties on its platforms. In 2023, in Gonzalez v Google, the US Supreme Court was teed up to address the question of whether platforms using algorithms to direct content to users nullifies their Sec. 230 immunity, but they dispensed with the case without addressing it. A more clear circuit split has emerged on the question since.