Two Senators Just Noticed That Digital Ad Fraud Is Happening And They Want The FTC To Investigate

WarnerSchumerCongress is starting to pay attention to ad fraud – and it’s looking to the Federal Trade Commission (FTC) for answers.

To be precise, Sens. Mark Warner (D-Va.) and Chuck Schumer (D-NY) drafted a letter to the FTC on Monday calling for the commission to take a closer look at the negative economic impact of digital advertising fraud on consumers and advertisers.

While ad fraud is more of a business problem rather than a consumer issue, and the FTC’s remit is to protect consumers, the senators contend that ad fraud unchecked will trigger a rise in wasted marketing costs that will eventually get passed down to the consumer in the form of higher prices for goods and services.

Although malicious ads drop malware that co-opt consumers’ computers, advertisers are the ones getting gouged by about $7.2 billion in 2016 alone, according to a study released in January by the Association of National Advertisers with help from White Ops.

Mike Zaneis, president and CEO of the Trustworthy Accountability Group, a fraud-fighting coalition of industry trade bodies, acknowledged that the consumer connection is a little tenuous. Although TAG has met with senior officials at the FTC to talk about its efforts, “I have to admit, it was not our primary agency of concentration.”

“But it’s an agency,” he said. “And the fact that ad fraud is becoming a topic for members of Congress for the first time raises the overall level of awareness.”

And publicity is a good thing, even in the slowdown before the summer recess.

Which is to say it’s pretty unlikely that the senators’ letter will result in any sort of consumer protection legislation.

“It would be very difficult to wrap this in any type of bill,” Zaneis said. “The FTC doesn’t go after an industry that’s being victimized when they’re making a strong effort to combat the problem.”

What the letter does do is ask a lot of questions: Is the FTC noticing more of one type of fraud than another? What’s the projected economic impact of data and revenue leakage? What’s the FTC doing to protect consumer data? What steps can be taken to reform opaque advertising exchanges? Is there a regulatory agency that provides oversight of mobile ad platforms?

In answer to that last question: yes, the FTC. But it has only ever enforced an egregious violation of the Children’s Online Privacy Protection Act. In late June, the FTC levied a $4 million fine against mobile ad network inMobi (which was reduced to $950,000 due to inMobi’s “financial condition”) for tracking the location of hundreds of millions of consumers, including children, without their consent.

But that’s a very different case than drafting legislation to protect consumers from the downstream effects of malware designed to populate botnets that suck advertisers dry.

Regardless, it’s significant in and of itself that lawmakers are taking an interest in ad fraud, although, according to Zaneis, relationships with national and international law enforcement agencies like the Department of Justice, the Department of Homeland Security and Interpol have the best chance of stamping out the problem.

The letter cites a recent report from the World Federation of Advertisers that points to bot traffic as the second-largest market for criminal organizations, just behind drug trafficking.

Which is why something has to be done, although it’s unlikely the FTC will be the one to do it.

“Every dollar that doesn’t go to the companies creating the media that consumers and advertisers both value will ultimately be a loss for consumers,” said Jason Kint, CEO of publisher trade org Digital Content Next. “Many in the industry recognize this and have begun to work on solutions. A good outcome would be this letter inspiring more attention to solutions outside of Washington.”

Warner didn’t respond in time for publication, and Schumer declined to comment.

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1 Comment

  1. A bit alarming Werner and Schumer fail to realize that the FTC isn’t the correct agency to pursue ad fraud, but also doesn’t have enforcement power to make a difference. Any company the FTC pursues will undoubtedly turn out to be a shell corporation likely set up offshore with few assets. The perpetrators will simply abandon the investigated entities and open new companies. The FBI and Department of Justice are far better equipped to pursue such groups.