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Applying Section 230 to Facebook’s Ad Business: New Case Has Big Implications for the CDA and AI

By: Daniel Morrison

Estimated reading time: 4 minutes

A recent case against Facebook in the Northern District of California could have major implications for the future of Section 230 of the Communications Decency Act — and for the adoption of AI. Tech companies are in a gold rush now to implement AI tools on their sites. But they may be reluctant to do so if providing AI tools is treated as a contribution to content that would defeat Section 230 immunity.

An Overview of Section 230

Section 230 of the Communications Decency Act (47 U.S.C. § 230) is a powerful tool that immunizes internet intermediaries (i.e., websites and ISP providers) from a wide array of causes of action that arise from the publication of third-party content. It has been used to immunize liability from claims ranging from defamation to terrorism. Section 230 was enacted because Congress recognized that imposing liability on internet intermediaries could stifle innovation and the development of the internet as a marketplace of ideas. Congress also wished to avoid federal and state regulation of speech on the internet, hoping instead that internet actors would self-regulate.

The Controversy of Section 230

The boundaries of Section 230 immunity are the subject of much debate and litigation. “The internet” and how we react to it has changed dramatically and in unforeseen ways since Congress passed the CDA in 1996. Actions taken by the websites such as content moderation, algorithmic curation, and content promotion raise questions about whether the sites are truly intermediaries hosting third-party content, and to what extent their contribution to the content could cost them Section 230 immunity.

Immunity to Fraud?

One such case is in the early stages of litigation in the Northern District of California. Dr. Andrew Forrest brought an action against Meta, Facebook’s parent company, over fraudulent Facebook ads featuring Forrest’s name and likeness. Unsurprisingly, Facebook raised immunity under Section 230 and moved to dismiss. Surprisingly, at least to some, U.S. District Judge Casey Pitts found Forrest had sufficiently pleaded a factual dispute as to whether Facebook’s ad business contributed to the creation of ads, defeating Section 230 immunity.

The plaintiff in the case, Dr. Andrew Forrest, is a prominent Australian billionaire, businessman, and philanthropist. His saga with Facebook began in 2014 when he learned that imposter pages purporting to be his were appearing on the site. Celebrity imposter pages are often created to satirize public figures, although they may also be used for fraudulent purposes. Forrest contacted Facebook and set up a verified page at the company’s suggestion. Facebook then began the whack-a-mole process of taking down the imposter pages.

In 2019, Forrest learned that his name and likeness were being used in Facebook-hosted ads for cryptocurrency and other fraudulent investment products. Forrest paid for a private investigation that was able to determine the fraudulent advertisers were located in Eastern Europe and Southeast Asia; the investigation also identified a number of Australian fraud victims. Forrest contacted Facebook and the company agreed to act quickly to take down the ads. Months later, the fraudulent ads still appeared.

Upholding Accountability

According to the complaint, advertisers and social media users interact differently with the site. They must agree to different terms of service. The site offers tools to advertisers to create ads, improve their look, and target appropriate markets. Forrest alleges that Facebook determines what a completed ad looks like and who sees it. Facebook even offers advertisers generative AI tools who add music and animation. According to the court, “the allegations leave a potential factual dispute as to whether the challenged ads are provided entirely by another information content provider.”

The court noted that there is “no permanent all-encompassing ‘provider’ status that indefinitely immunized any entity deemed in a particular case to be one.” Here, the complaint distinguishes between Facebook’s capacity as a social media, which generally enjoys Section 230 immunity, and Facebook’s capacity as an advertising business, which may or may not be contributing to the content it hosts in the ad space. A provider may lose immunity by making a material contribution to the creation or development of content. (See Kimzey v. Yelp! Inc. (9th Cir. 2016) 836 F.3d 1263.)

Forrest’s allegations present a factual dispute about whether Facebook’s ad system were neutral tools, or whether they tools themselves contributed to the content of the ads, so Forrest’s claims can move forward.

The case is Forrest v. Meta Platforms, Inc., Case No. 22-cv-036699-PCP, in the U.S. District Court for the Northern District of California.

© The Regents of the University of California, 2024.

This article is also accessible on CEB DailyNews platform located at: https://research.ceb.com/posts/applying-section-230-to-facebooks-ad-business-new-case-has-big-implications