Meta has failed in its attempt to strike out the Australian Competition and Consumer Commission’s (ACCC) further amended statement of claim (FASOC) over scam cryptocurrency advertisements on Facebook.
The case concerns ads featuring well-known Australian public figures, which, when clicked, led users to fake landing pages showing those figures endorsing crypto trading products (Celeb-Bait). The ACCC is pursuing allegations of misleading and deceptive conduct and accessoral liability against Meta as the platform operator who facilitated the distribution of these ads via its self service advertising system.
Justice Abraham made three preliminary points about Meta’s submissions:
- Meta analysed paragraphs ‘in a vacuum’ instead of reading the pleading as a whole.
- Meta raised objections now that it could have raised earlier, suggesting it was ‘searching for a deficiency or error’.
- Meta’s arguments reflected disagreement with the ACCC’s approach and not a misunderstanding of the case.
The conduct case and ‘reasonable safeguards’
The ACCC alleges Meta engaged in misleading conduct by failing to implement reasonable safeguards or warnings to prevent scam ads.
Meta argued these allegations were unclear, claiming that the ACCC did not show how each safeguard linked to each ad, the term ‘Celeb-Bait’ was inadequately defined and the word ‘reasonable’ was vague and distracting.
The Court rejected these arguments. Justice Abraham noted that ‘reasonable safeguards’ had been part of the original pleadings and were already considered by Yates J in an earlier decision. The allegation is that Meta could have adopted any one of several safeguards and doing so would have reduced harmful ads.
The Court also found the term ‘reasonable’ has an ordinary meaning and is clearly explained in the pleadings which set out what the safeguards are, why they are reasonable and how they could have been implemented. Meta’s complaint about not understanding ‘Celeb-Bait’ was described as artificial given Meta’s own responses to notices used similar terms.
Accessorial liability
The ACCC also alleges Meta is liable as an accessory because it knew scam ads were being displayed and would continue to appear, its ad review processes did not prevent them and that these ads would make misleading representations.
The ACCC does not allege any individual at Meta knew the content of each ad when it was posted (as opposed to a general awareness of the type of content which was being posted) but argues that knowledge should be attributed to Meta through its systems – an approach described by Edelman J in Productivity Partners as the ‘alternative path’. The ACCC accepted that its case involves a degree of novelty in this regard, but the Court was prepared to accept that the point should be properly argued at trial.
Meta argued the case was meritless, saying the ACCC must prove Meta knew each ad was misleading at the time it was shown. The ACCC argued that it is enough to show Meta knew the essential elements of the contraventions including the widespread problem and the content of ads via its systems.
Whether Meta’s knowledge is sufficient is a factual or mixed question of law and fact unsuitable for resolution in a strike out application. The Court noted this issue has ‘significant and broad implications’ and is a matter of public interest.
Meta also claimed parts of the FASOC were vague and embarrassing. The Court disagreed, finding the paragraphs in question were similar to those in the original claim (to which Meta had not objected) and that the ACCC provided sufficient detail including who made complaints, when and about what.
The outcome
Meta’s application to strike out the ACCC’s pleadings was dismissed and the ACCC was granted leave to file its FASOC. This decision clears the way for the ACCC’s case to proceed to trial.
The case raises important questions about the responsibilities of digital platforms in preventing scams and the level of knowledge required for accessorial liability in the online advertising context. While the ACCC is taking steps in this case to set legal expectations for platforms under the Australian Consumer Law, the Government has separately passed legislation to establish Scam Prevention Frameworks which would see financial services and digital platforms, among others, imposed with significant responsibility for proactively identifying and combatting scams.
