California’s Santa Clara County sued Meta Platforms, accusing it of profiting from Facebook and Instagram ads that promoted scams and violated California’s False Advertising and Unfair Business Practices Act.
The lawsuit, filed Monday in Santa Clara County Superior Court on behalf of all California residents, accuses the social media giant of tolerating deceptive advertising around the world. The lawsuit seeks damages, civil damages and an order prohibiting Meta from engaging in unfair business practices.
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Citing leaked internal documents first reported by Reuters last year, the complaint said the company earned as much as $7 billion in annual revenue from so-called “high-risk” scam ads that showed clear signs of fraud.
Instead of a broad crackdown on fraudulent advertisers, Meta largely tolerated misconduct and even put in place “guardrails” to thwart efforts to reduce fraud if those efforts cost the company too much, the county claimed.
Santa Clara further alleges that Meta significantly contributed to the prevalence of fraud by allowing middlemen to sell accounts to place ads that were not protected by law enforcement and by targeting scam ads to users who had clicked on similar bogus products in the past. Meta’s generative artificial intelligence systems often assisted unscrupulous marketers in creating scam ads, the county said, citing Reuters testing.
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“The scale of Mehta’s misconduct has reached extraordinary levels and needs to stop,” county counsel Tony LoPresti told Reuters. “As civil prosecutors in Silicon Valley, we have a special responsibility to hold technology companies accountable to the law.”
Meta did not immediately respond to a request for comment. The company denies claims that it knowingly accepted fraudulent advertising to maintain its revenue stream.
“We aggressively fight fraud and scams because people on our platform don’t want this content, legitimate advertisers don’t want it and we don’t want it,” a Meta spokesman told Reuters last year.
In the Santa Clara complaint, the county used such assurances as part of Mehta’s alleged misconduct. The county said that by assuring users that anti-fraud efforts were its top priority and rigorously reviewing ads that violated platform policies, Meta deceived the public and concealed the extent to which false advertising boosted its profits.
“Based on information and belief, Meta could even adjust the high volume of scam ads allowed on its platform to smooth its revenue or meet specific revenue targets,” the Santa Clara filing said.
To assist in the lawsuit against Meta, Santa Clara County Counsel is working with three outside law firms: Bernstein, Litowitz, Berger and Grossmann; Lane Public Law Group and Bishop Partnoy. But LoPresti said the county will retain full control over decisions involving the case and the companies will only be paid if the county wins.
(Reporting by Horwitz; Editing by Steve Steklow and Edwina Gibbs)
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