Facebook owns up to its fraud – but what should be the consequences?

By - CTL
February 13, 2017

By Marcus Honesta.

I think it’s fair to say people rarely trust those who have deceived them. In an unprecedented statement Facebook has fessed up and admitted that the figures they based their advertising rates on were false and misleading.

In a statement to the press 11th February 2017:

“Facebook has agreed to have its metrics externally audited. The move following pressure from Procter & Gamble CMO Marc Pritchard, who last month called for all publishers the company works with – Facebook included – to comply with MRC-accredited third-party verification this year”.

Material that has emerged has shown video views had been over-reported by as much as 80% for the past two years on Facebook. On 17th November 2016 it was acknowledged at least four more reporting errors included over-stating time spent with Instant Articles, over-reporting organic reach counts, discrepancy in video completions and over-stated app referrals.

In the example shared with media outlets Facebook acknowledged and explained that the error worked this like this: A brand’s video has played on Facebook for a total of five million seconds during a campaign.  During that period two million people started to watch the video. Only 750,000 of those watched more than three seconds.  Facebook had been calculating the average view time based on just people who have watched beyond three seconds – not the total number people who started watching the video. The difference is significant – in the above example the reported average view time would be 6.6 seconds and not 2.5 seconds.

Jason Tonelli, chief digital and technology officer at Publicis Media, said: “ It is a misguided view of average viewing time at an aggregate level – data which we use to plan, optimise and measure campaign success – so the error can misguide the allocation of campaign activity to Facebook based on this reporting.”

But is Facebook alone in its practices and its reporting procedures? We strongly doubt it!

In a statement the usually outspoken and strident critic of digital media reporting procedures Mark Ritson said in his column in The Australian last week that Pritchard’s speech “represents a watermark in assessing the state of digital media”. Come on Mark, where is the fire and brimstone that we are used to from you.

Procter & Gamble CMO may well helped bell the cat, and forced some of the main digital providers into acquiescing to his demands for accountability, but how do they make up for the sins of the past?

If you commit a crime 10 years ago, and finally get caught, justice demands that you pay for your crimes today.

The law is quite clear in this matter and is covered by “The Competition and Consumers Act 2010”, which has fairly hefty penalties for those who choose to flout the rules.


Competition and Consumer Act 2010

Under the section 18 of the Australian Consumer Law (contained in schedule 2 of the Competition and Consumer Act 2010 (Cth) it states.

Misleading or Deceptive Conduct

Pre-contractual misrepresentations may provide contractual remedies at common law or statutory remedies pursuant to the Competition and Consumer Act 2010 (Cth)

Misleading or deceptive conduct (statutory prohibition)

The prohibition on misleading conduct is set out in section 18(1) of the Australian Consumer Law:

“A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”

Section 4(2)(a) of the CCA defines conduct as:

“…doing or refusing to do any act, including the making of, or the giving effect to a provision of, a contract or arrangement, the arriving at, or the giving effect to a provision of, and understanding or the requiring of the giving of, or the giving of, a covenant;”

Section 18 essentially mirrors the previous ban on misleading or deceptive conduct in section 52 of the Trade Practices Act 1974 (Commonwealth), which was superseded by the CCA.

The elements required in order to establish misleading or deceptive conduct are:

  • The impugned conduct was done in trade or commerce;
  • The impugned conduct was, in all the circumstances, misleading or deceptive;
  • The claimant relied on the conduct; and as a result of its reliance on the conduct, the claimant suffered a loss.
Australian Consumer Law

Contraventions of the ACL in respect to the following conduct will attract a pecuniary penalty:

  • Unconscionable conduct
  • False or misleading conduct
  • Pyramid selling
  • Failure to respond to, or provide false or misleading information in response to, a substantiation notice
  • Various product safety provisions.

The maximum penalty for false or misleading and unconscionable conduct, pyramid selling and breaches of relevant product safety provisions is:

  • $1.1m for corporations
  • $220 000 for individuals.
  • Prison terms are also available to high end offenders

So let us take Facebook as a case in point. Surely if they have over claimed their figures by 80% for the past two years, it would seem reasonable that Facebook rebate the money that it has charged to their advertisers over those two years 40% per year, for their services.

There is nothing like putting your money where your mouth is to demonstrate contrition. Surely as a good corporate citizen and in our hoping to rebuild the trust that they have so clearly violated, this is the least they could offer.

Hopefully it wouldn’t come to a public trial, and the ensuring disgrace that it would cause to their already tarnished brand.

Let’s assume that Facebook at least has admitted to the past indiscretions. Where does the rest of the digital platform stand? And where indeed more importantly is the reliability and the truth in the whole digital subterfuge lie?

Is it as we reported last year in a story tilted “The Emperors New Clothes”, there is no doubt, that social media plays a vital and an important role in today’s modern media mix. But like all children, it must be given rules, ethics, and taught morality. Just like children if unattended, it will inevitably run amok, damage society, with its influence and penetration into young and influential fragile minds, causing irreparable damage.











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