US Senators Propose SCAM Act Against Fake Ads

U.S. Senators Introduce Bipartisan Bill to Combat Ad Scams

U.S. Senators Ruben Gallego and Bernie Moreno have introduced the bipartisan "Safeguarding Consumers from Advertising Misconduct Act," or SCAM Act. This legislation would legally require social media platforms to implement "reasonable steps" to vet their advertisers and combat fraudulent content.

Situational Overview

The SCAM Act emerges amid growing concerns over illicit advertisements online. The bill mandates that platforms verify government-issued identification for individual advertisers or confirm the legal existence of business advertisers. This initiative is partly a response to reports indicating that major platforms, such as Meta, potentially earn substantial revenue from ads that violate their policies. Non-compliance would be treated as a violation of the FTC’s prohibition of unfair business practices.

Economic and Market Impact

If enacted, the legislation could increase operational costs for social media companies like Meta Platforms due to the new, rigorous verification requirements. It may also impact advertising revenue streams derived from previously unvetted accounts. For the broader market, the act could enhance the integrity of the digital advertising ecosystem, potentially boosting consumer confidence and benefiting legitimate businesses that advertise online.

Summary and Outlook

The SCAM Act represents a significant regulatory step toward holding online platforms accountable for the advertisements they profit from. With endorsements from organizations like the American Bankers Association and AARP, the bill allows the FTC and state attorneys general to pursue civil action against non-compliant platforms. The market will be closely watching the bill's legislative progress and the industry's adaptation to these potential new standards.

FAQ

Q: What is the SCAM Act?
A: It is a proposed bipartisan U.S. bill that would legally require social media platforms to verify advertisers to prevent fraudulent advertising.

Q: Which companies will be most affected?
A: Major social media platforms that rely heavily on advertising revenue, such as Meta (Facebook, Instagram), will be directly impacted by the verification requirements.

Source: Investing.com