- Analysis
- Business
- Companies
- Social media
Billionaire Andrew Forrest’s court win threatens to expose Facebook’s trillion-dollar secrets
By Colin Kruger
Billionaire Andrew Forrest’s recent court win in the US promises to pierce the US laws that have long cloaked Facebook’s trillion-dollar business from the harm caused by fraud on its platform – including scam ads using images of Forrest.
A US court ruled last month that it would consider whether the social media group breached its duty to the public by allowing fraudulent advertisements to appear on its platform. The court also found that Forrest, executive chairman and founder of iron ore miner Fortescue, had cause for action under California common law to claim for misappropriation of his name and likeness.
Billionaire businessman Andrew Forrest is using his deep pockets to take on Facebook parent Meta over scam ads using his likeness.Credit: Bloomberg/Getty
Facebook owner Meta will be forced to reveal sensitive information on the inner workings of the advertising platform that provides all its revenue. A farcical interchange on Friday between Meta bosses and a parliamentary committee, however, demonstrates the challenge that lies ahead.
First, the good news. District Court Judge Casey Pitts handed down his order last month allowing Forrest’s civil liability case against Meta to go ahead in relation to the argument that Facebook plays an active role in creating and displaying the scam ads.
Over about six months to December 2023, 1700 new fraudulent ads including crypto scams were posted on Facebook, aided and abetted by 10 to 15 fake Andrew Forrest Facebook profiles popping up each week supporting them.
‘We are entitled to explore what happens between the delivery of the ad from the criminals to the display of the ad to a victim.’
Simon Clarke, senior litigation counse
“Dr Forrest has plausibly alleged that Meta played an active role in creating the ads at issue,” the court said in its order.
“That’s a really big blow to Facebook, opening the floodgates around the potential for liability on the advertising platform,” said Forrest’s senior litigation counsel, Simon Clarke.
It is the first time any party has successfully pierced Section 230 of the Communications Decency Act, which was enacted by former president Bill Clinton’s administration in the 1990s – before Facebook existed.
Meta will not say whether it will lodge an appeal against the decision, but the victory opens the way for Forrest to start legal discovery and gain information on one of Facebook’s most secretive operations – what role it plays in developing the ads that appear on its platforms.
“We are entitled to explore what happens between the delivery of the ad from the criminals to the display of the ad to a victim. And that’s a big, big step,” Clarke says.
This could help Forrest make his case that Meta is not just an innocent bystander, with no active role in the process, publishing ads for customers. If he can prove that the group’s role is substantive enough, Meta could lose immunity from prosecution over the harm caused by fraudulent advertising.
Advertising provides almost all of Meta’s $US134 billion ($200 billion) revenue.
It would be an enormous blow for Meta to be held liable for the advertising it publishes across its platforms – and for third-party platforms.
Senator Sarah Hanson-Young asked if there was someone from Facebook in Australia who could be served papers for legal action.
However, it may remain protected on an issue that is just as critical: the role it plays in ensuring the scam ads are targeted at customers who are vulnerable and susceptible to these offers.
According to Clarke, Facebook literally finds the victims for the fraudsters who are fans of billionaires such as Forrest and are willing to believe he is enticing them to invest in crypto scams.
“The algorithms are so sophisticated, they’re able to find elderly, vulnerable people who believe what Andrew Forrest says… But the law has been pretty clear that this ends up shifting you from the domain of advertising to the user platform. And they’re very expansive about the immunity with regard to users,” Clarke says.
Forrest lost, and will appeal, arguments that all of Facebook, including its ad business, should not remain shielded under decades-old US immunity laws that predate it and were created for a far simpler internet age.
The court judgement clarified that – in a US court – this immunity would prevail, which is bad news for aggrieved Australians who are forced to take legal action in the US because, for legal purposes, Facebook has no official presence in Australia.
Scenes from a tense parliamentary hearing on Friday involving Meta executives illustrated the farcical contortions needed to defend this legal loophole.
Meta’s regional head of policy, Mia Garlick, said it was unfair to characterise the group’s structure as being designed to evade local laws.
Senator Sarah Hanson-Young asked the simple question: if I wanted to sue Facebook, could I come to its Sydney office and serve it on someone?
“I’m sure people can, and do, and have, but in terms of whether it would be effective and legally binding, I’m not a lawyer,” Garlick said.
“And so often when people are asking to be able to service documents, we are trying to direct them to outside counsel to sort of support that process.”
It is up to the Australian government to try to remedy this situation, but a statement from Assistant Treasurer and Minister for Financial Services Stephen Jones suggests Australians shouldn’t hold their breath.
“We expect all companies operating in Australia to comply with Australian laws and values,” Jones said.
“We are committed to introducing mandatory scams codes on social media platforms, including Meta, which will include tough new obligations requiring these services to prevent, detect, disrupt, respond to and report scams. This will also include an obligation to take down this type of content.”
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.