Why Apps Should Be Held Responsible for Fraudulent Ads

By Noli Dee

In the digital age, advertisements are everywhere—popping up on social media, mobile games, news apps, and more. While many ads are harmless, a growing number are designed to scam users out of their money, steal personal information, or promote illegitimate services. The question arises: who should be held accountable when users fall victim to these fraudulent ads? While advertisers themselves are the root cause, the platforms and apps displaying these ads also bear significant responsibility.

This article explores why apps should be held responsible for fraudulent ads, backed by legal precedents, regulatory frameworks, and ethical considerations.

1. Why Apps Should Be Responsible

a. User Trust and Experience

Users engage with ads within apps under the assumption that the platform has vetted the content. When fraudulent ads appear, users often blame the app itself, as it is the platform facilitating the connection between advertisers and users. The presence of scams not only harms users but also undermines trust in the app.

Moreover, many apps label ads as "sponsored" or "recommended," creating an implicit endorsement. If users suffer harm due to these ads, the app cannot simply claim ignorance.

b. Profit Motive and Platform Role

Apps generate significant revenue from ads through cost-per-click (CPC), cost-per-impression (CPM), or cost-per-action (CPA) models. If an app profits from advertising, it should also share responsibility for the consequences of fraudulent content. Platforms cannot enjoy the financial benefits while avoiding accountability for harmful outcomes.

c. Gatekeeping Responsibility

Apps act as intermediaries between advertisers and users. Just as they moderate user-generated content to prevent harmful material, they should apply similar scrutiny to advertisements. Failing to do so creates an environment where fraud can flourish.

2. Legal Precedents Supporting App Liability

While direct cases holding apps fully liable for fraudulent ads are still developing, several legal precedents suggest that platforms can be held responsible when they facilitate harmful content.

a. United States Precedents

FTC v. LeadClick Media (2016): In this case, an affiliate marketing network was held liable for deceptive third-party ads. The court ruled that the platform played a significant role in the distribution of fraudulent content and thus shared responsibility.

Meta (formerly Facebook) Lawsuit (2023): The Federal Trade Commission (FTC) and multiple state attorneys general pursued Meta for failing to prevent fraudulent ads on Facebook and Instagram. The case argued that Meta profited from these ads and ignored user complaints, setting a precedent for platform accountability.

Section 230 Limitations: While Section 230 of the Communications Decency Act generally protects platforms from liability for third-party content, courts have narrowed this immunity. When platforms benefit from or facilitate harmful content, including fraudulent ads, they can be held liable.

b. International Precedents

United Kingdom - Online Safety Act (2023): This legislation requires platforms, including apps, to take proactive steps to prevent fraudulent ads. Non-compliance can result in significant fines from Ofcom, the UK’s communications regulator.

European Union - Digital Services Act (2022): The EU mandates that platforms vet advertisers, provide transparency reports, and remove fraudulent ads promptly. Failure to comply can lead to fines of up to 6% of global revenue.

Australia - ACCC Action Against Google (2021): The Australian Competition and Consumer Commission (ACCC) pursued Google for allowing misleading ads related to financial services. The case established that platforms can be held accountable for ad-related fraud.

3. Key Legal Arguments for App Liability

Several legal principles support the argument that apps should be held accountable for fraudulent ads:

Negligence: If an app fails to implement reasonable safeguards against fraudulent ads, it can be considered negligent. This is particularly true if the app profits from the ads and ignores user complaints.

Implied Warranty: By displaying ads, apps implicitly vouch for their legitimacy. When fraudulent ads harm users, this trust is breached.

Unjust Enrichment: If apps profit from fraudulent ads while users suffer harm, courts may find them liable under the doctrine of unjust enrichment.

Duty of Care: As intermediaries between advertisers and users, apps have a duty to protect users from foreseeable harm, including fraud.

4. How Apps Can Prevent Fraudulent Ads

To fulfill their responsibility, apps should adopt the following practices:

Stricter Ad Vetting: Implement advanced AI-driven and manual ad review systems to detect fraudulent content before it reaches users.

Clear Reporting Channels: Provide easy-to-access features for users to report suspicious ads and investigate complaints promptly.

Transparency and Warnings: Label ads with clear disclaimers about third-party content and highlight potential risks based on historical behavior.

Financial Accountability: Share liability with ad networks and advertisers, including compensating users in proven cases of negligence.

Regulatory Partnerships: Collaborate with consumer protection agencies and law enforcement to identify and shut down fraudulent advertisers.

5. Conclusion: Shared Responsibility for a Safer Digital Experience

While advertisers are the primary source of fraudulent ads, apps cannot escape responsibility. As platforms facilitating ad distribution and profiting from it, apps have a duty to protect their users. Legal precedents, regulatory frameworks, and ethical considerations all point to the need for stricter accountability.

By implementing stronger safeguards, providing transparency, and accepting partial liability, apps can create a safer digital ecosystem—one where users can engage without fear of falling victim to fraud. It’s time for platforms to step up and prioritize user protection alongside profit.