A new ruling by a German court could pave the way for a major legal challenge to Facebook and Instagram, a new service launched by the social media giant, regarding whether these platforms should be liable for any ads they post on third-party sites that are misleading or illegal. The decision calls on the U.S. tech firm to delete some bogus ads and to compensate the persons harmed by them.
The case had been filed by the operator of a financial information portal in Germany and the founder of this portal. They claimed their brand and their image had been misappropriated in ads for dubious investment deals. The ads seemed to be associated with the real financial services, and may be more effective in fooling consumers who see them online.
The dispute centres on a burgeoning issue that many social media users are experiencing. Using common names, photos, company logos etc that are recognized as authentic, fraudsters can produce advertising that looks legitimate. As platforms like Facebook and Instagram push ads to a huge user base via automation, scams can easily target a massive number of people before detection and elimination.
According to the court’s ruling, the German financial portal reported almost 260 violations to Meta during August 2024 alone. But even with those reports, some of the ads were still up for a week or more before they were taken down. The length of time was an important factor in the legal battle because the case was not just about whether the ads were reported to Meta, but also the speed in which it responded to the reports.
The court dismissed arguments presented by Meta that the Digital Services Act, an EU law, might free online platforms from any liability for illegal material created by users, where certain conditions are met. The reason the court focused on that was because of the role that Meta’s systems played in controlling, and distributing, content. The court did not view Facebook and Instagram merely as places where posts are laid out in reverse-chronological order, but as places where algorithms and advertising dictate what content and information is shown to users.
That could have broader consequences for the role of big tech companies. Social media platforms have come to increasingly use recommendation algorithms, targeted advertising and automated systems to decide what content to show specific audiences. These systems are key to the operation of platforms commercially, but they can also create thorny issues of responsibility if the platforms become responsible for the dissemination of harmful or deceptive content.
The court also cited a precedent set by a June decision by the European Court of Justice. The previous ruling was important because it helped the court determine the scope of European digital rules on online platforms and what obligations they might have regarding problematic content. As the body of digital law in Europe grows, its focus has increasingly been on the role of platform design in content moderation and legal liability.
Meta has challenged the German court ruling. In a statement, a Meta spokesperson said they felt the decision was “misguided,” and are mulling further steps, citing “proactive detection efforts and removal of reported content” they took.
The company’s response points to one of the core issues with online fraud. Automated detection plays a crucial role in platforms’ moderation processes for handling vast amounts of content and ads on a daily basis. Meanwhile, fake ads can be challenging to spot, especially if they’re made to look like a real company, public figure, or a financial service. User and business reports can thus help to fill the gap that automated systems can fail to pick up.
If your name or image is being used fraudulently, the repercussions can be far-reaching for businesses and individuals. Fraudulent investment promotions can cause harm to a company’s reputation if users think that the company is involved in the promotion. Persons whose images have been misappropriated can also end up linked to claims or offers they never made. The quick removal of ads is, therefore, crucial, not just for protecting potential victims, but also for averting harm to actual victims and companies or individuals.
As in the German case, it raises the issue of what platforms should do when they are made explicit knowledge of allegedly fraudulent material. The court’s ruling that some of the advertisements were still live for considerable periods of time indicates that response times may become a significant consideration in the context of any dispute about the platform liability. The problem is especially acute when ads can be displayed repeatedly to new audiences via automated targeting and distribution mechanisms.
The order also mandates that Meta disclose data about the fraudulent ads and its revenue from such ads. This requirement may help to set scale of the disputed activity and calculate economic consequences related to the ads. It also highlights the general principle of transparency in investigations of potentially illegal commercial activity in digital advertising systems.
The decision is not yet final. The court said it could be appealed, and that would allow the legal battle to continue with a higher court. The final decision may offer additional clarity on the application of German and European law to social media platforms which actively shape the spread of content by algorithmic and advertising features.
