US Senators unveil bill against scam ads on social media platforms: What it means for Facebook, Instagram, YouTube and others

US Senators Ruben Gallego and Bernie Moreno have introduced a legislation aimed at making social media companies responsible for scam ads running on their websites. The Safeguarding Consumers from Advertising Misconduct Act, or the SCAM Act, will legally require platforms like Facebook, Instagram, YouTube and others to thoroughly investigates their advertisers. It will also require these companies to take “reasonable steps” to combat fraudulent advertising by the Federal Trade Commission and state attorneys general.“We can’t sit by while social media companies have business models that knowingly enable scams that target the American people,” said Moreno, a Republican from Ohio. Meanwhile, Gallego, a Democrat from Arizona noted, “If a company is making money from running ads on their site, it has a responsibility to make sure those ads aren't fraudulent.”The bill gained momentum following a report by the news agency that cited internal documents from Meta Platforms, revealing that the company expected to earn roughly 10% of its 2024 revenue – about $16 billion – from advertisements for scams and illicit products.“We aggressively fight fraud and scams because people on our platforms don’t want this content, legitimate advertisers don’t want it and we don’t want it either,” a Meta spokesman told Reuters last year. While Meta has disputed these figures, claiming its internal statistics “overestimated” the proportion of illicit revenue, this triggered calls for investigations from the FTC and the SEC. The new bill also claims that some platforms have “abandoned tighter advertiser verification processes” to avoid driving away high-revenue.Under the SCAM Act, non-compliance is provisioned to be treated as a violation of the FTC’s prohibition on unfair or deceptive business practices. Reportedly, American Bankers Association and the AARP – organisations that represent the demographics most frequently targeted by digital financial fraud - have already supported the bill