Asserting that fraud on social media is "surging," the Federal Trade Commission issued orders to eight social media and video streaming platforms, seeking information about their advertising placement practices as well the steps they are taking to ensure that consumers are able to identify commercial advertising on their platforms as advertising.
In a statement, Samuel Levine, Director of the FTC's Bureau of Consumer Protection, said, "Social media has been a gold mine for scammers who tout sham products and others scams that have cost consumers enormously in recent years. 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 orders, which were sent to Meta, Instagram, YouTube, Twitter, and other platforms, seek information from 2019 through 2023, so that the FTC can "study relevant business conduct since the start of the COVID-19 pandemic." The orders were issued pursuant to the FTC's Section 6(b) authority, which allows for the FTC to conduct studies that do not have a specific law enforcement purpose.
The FTC said that the purpose of the study was to "help the Commission better 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 FTC also explained that the study will show "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 service directly through the ad, and virtual reality and other extended reality ads."
The orders seek detailed information from the platforms, including, for example:
- All types of ads sold by the platforms, how the ads are priced, and their targeting capabilities;
- What role platforms play in creating advertising;
- How ads are placed on the platforms;
- Information related to specific categories of advertising, including products for treating substance use, products for treating diseases, weight-loss products, income opportunities, investment-related programs, cryptocurrency products, and job listings;
- How advertising performance is measured;
- How the platforms engage in affiliate marketing;
- The platforms' advertising standards and any clearance procedures the platforms follow;
- Platform compliant procedures;
- How the platforms ensure that advertising is recognizable as advertising;
- Tools provided by the platforms for influencers to use to include disclosures;
- How the platforms engage in e-commerce; and
- Research and testing the platforms have conducted.
The orders don't specify the specific timing for when the platforms must produce their reports to the FTC, but given how much information is being requested, it's likely that it's going to take quite some time for them to produce it -- and even longer for the FTC to process it.
So, what does this all mean for advertisers?
First, as part of its ambitious agenda, the FTC is engaging in a wide-ranging process -- which includes rulemakings, rethinking longstanding advertising guidance, and, now, these orders -- to rethink its consumer protection priorities and to consider whether its consumer enforcement program has been effective. Don't assume that today's FTC is going to have the same priorities, and the same approach to enforcement, as it has had in the past. The FTC has already shown that it is doing things differently and it seems pretty likely that it will continue to do so.
Second, the FTC is making it very clear that it believes that advertising that appears on social media platforms is part of the problem. As FTC Chair Lina M. Khan asserted, "the FTC's work has uncovered that major social media and video streaming platforms have become a huge vector for misleading ads, financial scams, and other types of fraud." The FTC couldn't be making itself any clearer that it is concerned about advertising on social media platforms and it is looking for solutions to address the perceived problems. If you're advertising on social media platforms, you should take this warning seriously.
Third, the FTC has historically focused almost all of its enforcement efforts on the advertisers themselves (and sometimes on the advertising agencies that they work with). These orders may indicate that the FTC is considering whether the social media platforms bear some responsibility for false advertising that runs on their platforms. When, in the past, the FTC has looked to hold media organizations responsible for advertisements that they publish, it's often because the media is playing a larger role than just publisher (such as the recent enforcement action against Google and iHeartMedia where the FTC alleged that iHeartMedia facilitated the creation of deceptive DJ endorsements). This is likely to be a focus of the inquiry here as well, particularly because of the challenges that the FTC will surely have in holding platforms responsible for content supplied solely by the advertisers.
"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" -- Samuel Levine, Director, FTC Bureau of Consumer Protection