Published on JD Supra on October 27, 2020
In a Consumer Protection Data Spotlight dated October 21, 2020, the Federal Trade Commission released data for the first half of 2020, which indicates that consumer-reported scams originating on social media platforms increased threefold over the past year and rose drastically during the first two quarters of 2020. While there were several forms of reported scams, the majority related to unfulfilled orders associated with ecommerce transactions made by consumers after being prompted by ads seen on social media platforms.
The data covers over 24,000 complaints for a combined loss of $117 million in the first half of 2020 alone, compared to the entirety of 2019 with just over 23,000 complaints and a total reported loss of $134 million. Moreover, reported cases nearly doubled from the first to second quarter of 2020 (rising from 8.8K to 15.9K) and more than tripled from the mid-year point in 2019 (when 4.7K cases were reported) to the same mid-year point in 2020 (when 15.9K cases were reported).
The FTC attributes the rise to savvy bad actors that use social media platforms to present convincing advertisements and other offers to unsuspecting consumers. Social media platforms are especially attractive to would-be scammers since the time and monetary investment to access these platforms is quite low.
In addition to scams involving online shopping orders that were never fulfilled, consumers reported “romance scams” (where a bad actor poses as a friend or confidante of a consumer and tricks the consumer into giving the bad actor money) and economic/multi-level marketing schemes. The pandemic may play a role in the increased number of complaints, as more consumers are shopping and connecting online than ever before. The FTC further noted that some consumers who had lost income due to the COVID-19 pandemic proved to be attractive targets as well.
The reported increase of scams on social media platforms comes amid increased calls to overhaul Section 230 of the Communication Decency Act (which shields online content platform providers from liability for content on their platforms that they do not generate themselves). Conservatives have increasingly called for changes to Section 230 and increased oversight and transparency in connection with content moderation practices of online service providers. This week, the Senate Commerce Commission will hold a hearing of social media platform company leaders focused on online censorship and content moderation practices utilized by those companies.
To protect against these scams, the FTC suggests certain practices, including: