A German court says Meta is liable for fake ads posted by third parties on Instagram and Facebook and orders it to remove such content and pay damages

Meta must now proactively remove scam ads and pay damages for those it hosted.

A German court has ruled that Meta is liable for fake investment ads appearing on its platforms, Facebook and Instagram. The Frankfurt Regional Court determined that Meta's algorithmic ad ranking and auction systems make it more than a passive host, thus it cannot claim immunity under the EU's Digital Services Act. The lawsuit was brought by German personal finance platform Finanzfluss and its co-founder, Thomas Kehl, who claimed scammers used their trademarked logo and Kehl's photo without permission. The court ordered Meta to remove the fraudulent ads, pay damages, and cease distribution of similar content. Meta, which reported nearly 260 such violations in August 2024 alone, argued it was unaware of the specific ads. The ruling, which cited a prior EU court decision on algorithmic content placement, is subject to appeal. This decision escalates legal challenges against Meta regarding scam advertisements in Europe.

This ruling signals a significant shift in how platforms are held accountable for third-party advertising content, moving beyond the 'passive host' defense. The court's reasoning, emphasizing Meta's control over ad visibility through its algorithms, suggests a new legal precedent for ad-tech companies. Platforms actively influencing ad placement and ranking may face greater responsibility for the legitimacy of the advertisements they serve, potentially impacting their revenue models and operational strategies.

The decision will likely prompt stricter content moderation policies and increased due diligence in ad vetting across social media companies operating in Europe. Other platforms that employ similar algorithmic ad-serving mechanisms may face similar legal challenges if they fail to adequately police fraudulent advertisements. This could lead to increased investment in AI-driven content verification and a re-evaluation of how ad revenue is generated and protected against illegal or deceptive practices.