Billionaire lands a punch on Facebook, but can he score a knockout?

When Andrew “Twiggy” Forrest began US civil proceedings against Facebook owner Meta in 2021 to stop the social media group posting scam ads featuring his likeness, it is unlikely Mark Zuckerberg knew anything about the rambunctious Aussie billionaire.

He does now.

Andrew Forrest’s legal team say Meta’s automated ad systems play an active role in generating and targeting scam ads.Credit: Getty

Let’s put aside the fact, revealed in court hearings this week, that Forrest featured in 230,000 fraudulent ads on Meta platforms like Facebook. And that’s just since 2019.

What will now force Zuckerberg and his subordinates at 1 Hacker Way to take notice is the court order that will force them to reveal – for the first time – precisely what role Facebook plays in developing ads on its platforms and targeting them at users.

Meta has been fighting for more than a year to withhold this information. It now has less than 14 days to report back to the court on its progress in handing it all over to Forrest’s lawyers.

The larger-than-life Forrest might be tempted to say that this development has the potential to roil Meta investors in a manner that would rival Donald Trump’s chaotic evisceration of the Meta and its Magnificent Seven brethren. And he would be right.

Almost all of Meta’s $US164 billion ($258 billion) in revenue last year was generated by ads it serves up to Facebook, Instagram and WhatsApp users.

It is the source of Meta’s $US1.5 trillion market valuation. And it is all protected by a feature more magical than any of the AI or virtual-reality schtick Facebook serves up to its customers. Meta is protected from almost any harm caused by its platforms thanks to the Communications Decency Act (CDA), which was enacted by president Bill Clinton’s administration in the 1990s – before Facebook existed.

It was designed to protect traditional internet service providers, such as AOL, from any liability for what was published on their platforms.

Meta enhanced this with other magic tricks such as putting its advertising business inside the same company that owns the social media platform. This means Facebook can use the same immunity designed to ensure it was not liable for content posted on its sites to make sure it also was not liable for scam ads it is paid to post.

It is the cloak that protects Meta from any liability for the scam ads that fleece Facebook and Instagram users of billions of dollars each year.

Andrew Forrest is not the only famous Australian whom fraudsters use in their scam ads.Credit: Nathanael Scott

It means that Meta gets all the upside of getting its high-margin revenue from fraudsters, but suffers zero downside from its users losing literally billions to these scammers.

The retention of this immunity relies on Meta’s assurance that it merely publishes the ads and has no direct role in developing them. That could come under challenge depending on what is revealed in the information it will now be forced to hand over.

If the immunity is removed, victims could sue Meta for this fraud, and the tech giant would be forced to ramp up its efforts to expunge the scam ads.

Meta has declined to comment on the ongoing case, but pointed out previously that it is up against sophisticated, well-funded and well-connected organised criminal networks.

Now let’s imagine Meta is successful. The billion-dollar question is, how much revenue does Meta lose if the ads from these criminal networks are turned away?

Federal Court proceedings by the Australian Competition and Consumer Commission (ACCC) last year suggest it is a significant amount of money – even for Meta.

The court heard that half of cryptocurrency-related Facebook ads examined by the competition watchdog were either fraudulent or violated Meta’s policies. And evidence from overseas backs this up.

Analysis by the fraud team of UK’s TSB Bank last year showed that that more than one-third of adverts on Facebook Marketplace could be scams.

But even if Forrest manages to get Meta’s cloak of immunity removed from its ad business, there will still be another major hurdle for Australian victims.

Facebook’s lack of a local presence in Australia means victims will be forced to sue it in a US court, which is why Forrest was ultimately forced to sue the digital giant in California.

Going to a US court is a far easier for a billionaire who has a Bombardier Global Express 7500 jet at his disposal. The rest of us will have to rely on the Australian government to remedy this situation by forcing Meta to have a legal presence in Australia.

The sad news is, if holding Meta accountable sounded like a remote prospect before Donald Trump took office, it’s now next to impossible.

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