California's Santa Clara County has filed a lawsuit against Meta Platforms, accusing the company of profiting from scam advertisements on Facebook and Instagram in violation of the state's false advertising and unfair business practices laws. The complaint, lodged on Monday in Santa Clara County Superior Court on behalf of all California residents, alleges that the social media giant knowingly tolerated fraudulent advertising globally. The suit seeks restitution, civil damages, and an injunction to halt Meta's alleged unfair practices.
Allegations of Revenue from Scam Ads
The lawsuit draws on leaked internal documents first reported by Reuters last year, claiming that Meta earned up to $7 billion annually from so-called "high-risk" scam ads that exhibit clear signs of fraud. Rather than cracking down on fraudulent advertisers, the county alleges, Meta largely tolerated the misconduct and even established "guardrails" to block anti-scam efforts if they proved too costly.
Meta's Response
Meta has vowed to defend itself. Spokesperson Andy Stone stated, "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."
Details of the Alleged Misconduct
Santa Clara County contends that Meta materially contributed to a fraud epidemic by allowing middlemen to sell ad accounts that were shielded from enforcement and by targeting scam ads at users who had previously clicked on similar bogus offerings. Citing Reuters' testing, the county alleged that Meta's generative AI systems often assist unethical marketers in creating scam ads.
County counsel Tony LoPresti told Reuters, "The scale of Meta's misconduct has reached an extraordinary level, and it needs to stop. As civil prosecutors in Silicon Valley, we have a special duty to hold tech companies accountable to the law."
Deceptive Practices Alleged
The complaint seizes on Meta's public reassurances about its anti-scam efforts, arguing that by claiming these efforts are a top priority and that ads are rigorously reviewed, Meta deceived the public and concealed how bogus ads boosted profits. The filing states, "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."
Legal Team and Next Steps
To assist in the suit, Santa Clara's county counsel is collaborating with three outside law firms: Bernstein, Litowitz, Berger and Grossmann; Renne Public Law Group; and Bishop Partnoy. However, the county will retain full control over case decisions, and the firms will only be compensated if the county prevails, LoPresti said.
