FTC Investigates Paid Ad Practices Related To Fraud, Financial Scams, Counterfeit

The Federal Trade Commission (FTC) on Thursday put eight social media and video streaming platforms on notice as it seeks information on how these companies scrutinize and restrict paid commercial advertising that is deceptive or exposes consumers to fraudulent health-care products, financial scams, counterfeit and fake goods, or other fraud.

In 2022, consumers reported losing more than $1.2 billion to fraud that started on social media, more than any other contact method, according to FTC data.

Meta, Instagram, YouTube, TikTok, Snap, Twitter, Pinterest, and Twitch received an order, which the companies are required to comply with by law.

“Social media has been a gold mine for scammers who tout sham products and other scams that have cost consumers enormously in recent years,” stated Samuel Levine, director of the FTC’s Bureau of Consumer Protection. “This study will help the FTC ensure that social media and video streaming companies are doing everything they can to keep scammers and deceptive ads off their platforms.”

The requirements are extensive, but the goal is to help the Commission understand how prevalent deceptive advertising is on social media and video streaming platforms, the consumers who may be harmed by that advertising, and the effectiveness of the platforms’ oversight of advertisers -- including whether the companies treat English-language and Spanish-language ads differently.

The study should provide information on how the platforms create ads (including any use of generative artificial intelligence) and track and classify ads as well as the ad formats offered to advertisers -- including shoppable ads, which allow consumers to purchase products or services directly through the ad, as well as virtual reality and other extended reality ads.

The FTC also is asking for information on company standards and policies related to paid commercial ads and their processes for screening and monitoring for compliance with those standards and policies, including through human review and the use of automated systems.

The orders also require the companies to report their advertising revenue, the number of ad views, and other performance metrics, including for ads involving categories of products and services that are more prone to deception such as those intended to treat, prevent or cure substance-use disorders and tout income opportunities.

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