FTC blames social media platforms for spike in consumer fraud

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The agency head says platforms ‘tolerate and promote’ fraud

Federal Trade Commission (FTC) Chairwoman Lina Khan has accused “Big Tech” of monopolistic behavior. Now she says these companies are also responsible for a surge in consumer fraud during the pandemic.

In an appearance before the House Energy and Commerce Committee, Khan said fraudsters are using social media platforms to take advantage of unsuspecting consumers.

“Fraud has continued to surge,” Khan said. “One reason is that fraud today is supercharged by digital platforms where this conduct is tolerated and even promoted.”

Fellow FTC Commissioner Rohit Chopra elaborated on the problem facing regulators, telling lawmakers that the commission needs to understand the platforms’ algorithms so it can understand how scammers use them to target their victims.

“We can’t just go after fraudsters one by one, we need to look at the gatekeepers and those who profit from amplifying them as well,” Chopra said.

FTC faces challenges to cracking down on fraud

But on social media platforms, there are few if any actual “gatekeepers,” the result of Section 230 of the Communications Decency Act (CDA). That provision states that internet platforms cannot be held legally responsible for content on their sites posted by a third party.

That issue is currently a point of contention in the ongoing debate about COVID-19 misinformation that’s being posted on social media sites. Where traditional media outlets like newspapers and TV stations are accountable for the content they provide, the law says internet companies are not.

Khan also told lawmakers that the FTC faces other challenges, from staffing and budget to legal restrictions placed upon it by the U.S. Supreme Court.

“The Commission’s ability to tackle key challenges – from COVID fraud to anticompetitive conduct – has been substantially diminished after the Supreme Court’s recent decision in AMG, which barred the Commission from seeking monetary relief under Section 13(b) of the FTC Act,” Khan said.

Khan testified that the FTC is facing “severe resource constraints” as it works to address the soaring number of global mergers and acquisitions and an increasing number of consumer complaints to the agency. She asked the committee to consider additional resources to help it effectively achieve its mission.

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