ACCC sues Facebook parent Meta for scam ads featuring Dick Smith, David Koch, Mike Baird; Meta to defend action

‘Facebook is far from a dumb billboard in the town square,’ says ACCC chair Rod Sims, alleging the platform knew ads were duping consumers.

The ACCC alleges Facebook's conduct has breached Australian consumer law. Picture: Chris Delmas / AFP

The nation’s competition regulator is suing Facebook’s parent company over scam advertisements featuring prominent Australians that it claims resulted in $100m in losses for consumers.

The Australian Competition & Consumer Commission has alleged that Meta – which owns Facebook – knew that cryptocurrency ads it published on its platforms would result in false, misleading or deceptive conduct.

The regulator said the ads heavily promoted investment in cryptocurrency and money-making schemes on its site and were likely to misled Facebook users by associating the financial ploys with high-profile Australians including former NSW premier Mike Baird, Seven Network Sunrise host David Koch and businessman Dick Smith.

These high-profile figures had not approved the advertisements or endorsed them – and even after they complained about them, the ads were not removed.

Outgoing Australian Competition & Consumer Commission chairman Rod Sims said Meta must be held accountable for the ads they ran on their platforms. The regulator is pursuing action in the Federal Court.

“The essence of our case here is that Facebook is responsible for the ads it places on its platform,” Mr Sims said on his final day as chairman of the ACCC.

“Apart from resulting in untold losses to consumers, these ads also damage the reputation of the public figures falsely associated with the ads.

“Meta failed to take sufficient steps to stop fake ads featuring public figures, even after those public figures reported … that their name and image were being featured in celebrity endorsement cryptocurrency scam ads.”

Outgoing ACCC chairman Rod Sims. Picture: NCA NewsWire / Gary Ramage

One consumer caught up in the scam lost more than $650,000 after getting lured by a false investment opportunity advertised on the platform.

Mr Sims said other high-­profile Australians caught up in the online scams including billionaire Andrew Forrest, who had contacted him about ads he had encountered.

“I took three or four calls from Andrew Forrest,” he said. “Now Andrew Forrest is not part of these proceedings – he’s taken his own action under different laws.”

Dr Forrest last month said he was taking criminal action against Meta in the Magistrates Court of Western Australia after alleging they “failed to create controls or a corporate culture to prevent its systems being used to commit crime”.

He said he made several requests to Facebook to stop his image from being used to promote online investments and even wrote an open letter to Meta chief executive Mark Zuckerberg in 2019.

Dr Forrest is also taking legal action in California, alleging the company “knowingly profits from this cycle of illegal ads”.

“Facebook has shown little appetite to self-regulate or take basic steps to protect Australians from the misuse of its platform by crooks and scammers, so I’ve been left with no other option than to take this action,” Dr Forrest said in February.

The legal proceedings by the ACCC relate to the conduct of Meta Platforms and Meta Platforms Ireland Limited, which are allegedly in breach of Australian Consumer Law or the Australian Securities and Investments Commission Act.

Mr Sims said it had become clear that Facebook was “far from a dumb billboard in the town square”.

“People on the site become the product they’re selling to the advertisers who pay Facebook money,” he said.

Facebook on Friday said it intended to defend itself against the proceedings.

“We don’t want ads seeking to scam people out of money or mislead people on Facebook – they violate our policies and are not good for our community,” the statement said.

“We use technology to detect and block scam ads and work to get ahead of scammers’ attempts to evade our detection systems.”

Facebook also said it had co-operated with the ACCC investigations, which included delving into claims that Facebook ran ads with links that sent users to a fake media article that showed high-profile Australians endorsing a cryptocurrency or money-making scheme.

“We will review the recent filing by the ACCC and intend to defend the proceedings,” Facebook said in a statement. “We are unable to further comment on the details of the case as it is before the Federal Court.”

Mr Sims criticised the social media giant and said it should be doing much more to prevent the publication of fake ads, especially after reports from celebrities voicing serious concerns.

“It is a key part of Meta’s business to enable advertisers to target users who are most likely to click on the link in an ad to visit the ad’s landing page, using Facebook algorithms,” he said.

“Those visits to landing pages from ads generate substantial revenue for Facebook.”

The ACCC said Meta “aided and abetted” or was knowingly concerned in false or misleading conduct and representations by the advertisers.

The ads were likely to mislead Facebook users into believing the scam schemes were associated with the people in the ads, it said.

Users were then invited to sign up and were subsequently contacted by scammers who used “high pressure tactics, such as repeated phone calls” to convince users to deposit funds into the fake schemes.

Mr Sims said the ACCC’s proceedings would ensure some level of online protections within social media platforms for Australians so “that they can use the internet and be safe”.

“That can only happen when the major platforms put in place processes to ensure their safety,” he said.

“And here, we’re alleging that Facebook did not do that.

“There’s no other competition or consumer agency that has taken action of this sort. We think it’s a very important matter.”

In the three months to December 31, Facebook said it had removed 1.7 billion fake accounts – 99.9 per cent before they could be reported. There were also 1.2 billion pieces of spam content removed from its site.