with Tonya Riley

Patagonia typically blasts emails to its customers promoting jackets and other outdoor products. But earlier this summer, customers received a very different message in their inboxes. 

“A Note from Customer Service: There are fraudulent ads on Facebook and Instagram offering fake discounts on Patagonia products. It's a credit card scam," the emails said. 

The mass warning reflected a larger struggle over a major surge in fake ads over the past two years on Facebook – affecting not just Patagonia but other large companies like Microsoft and Ralph Lauren.

In the case of Patagonia, fraudsters leveraged the social network's powerful advertising tools to target people with fake promotions for Patagonia products, and then directing them to other websites that siphoned their credit card details or sold them a counterfeit version of a popular Patagonia product. 

Between February and July, Patagonia says it received more than 1,500 reports of fake Facebook ads for its products. In that same time period, the company submitted 236 reports to Facebook about problematic ads, sometimes containing up to two dozen examples.

The company has also seen massive spikes in ads around major shopping days, such as Black Friday right after Thanksgiving. 

Rob Tadlock, Patagonia's associate general counsel, told me the company is constantly hunting for these ads, which requires a major investment from its legal and customer service teams. Patagonia has been asking Facebook for help to address the problem since November 2018, and Tadlock told me the social network hasn't done enough to address the issue. 

“We have really not been able to get them to partner with us in a way that allows us to meaningfully address this issue that's a growing challenge for our customers,” he said. 

The ads can result in major financial damage for customers, as well as challenges for brands whose consumers think they're receiving below quality products if they don't realize the goods they receive are counterfeit. 

Patagonia isn't the only company confronting Facebook ad scams. 

More than 70 consumer and apparel brands, ranging from HP to the The North Face, have been impacted by fraudulent ads on Facebook and its subsidiary Instagram since 2017, according to a new report that will be published later today from the Transnational Alliance to Combat Illicit Trade. The group is pressuring on tech giants and policymakers to do more to stamp out online fraud. 

Jeff Hardy, director general of the alliance, said shoppers have a certain comfort level when they're perusing well-known social networks, and might not be on the lookout for counterfeit ads. He compared online shopping to the experience of going to a well-known grocery chain and not expecting the fruit there to be rotten.

“There's an inherent responsibility, especially in this day and age, to make sure that when people walk through your doors that they have a safe shopping experience,” he said.

The ad fraud challenge is particularly acute during the pandemic, as widespread stay-at-home orders and store closures prompted a surge in e-commerce. There are also many legitimate markdowns and sales as retailers adjust to an economy transformed by the coronavirus, and it can be difficult for consumers to distinguish between legitimate sales and offers that are too good to be true. 

It's also a critical moment for Facebook. 

Facebook has seen major brands – including Patagonia and Unilever – pause ad spending on its platform in protest of its handling of hate speech. The company's size and power is under the microscope as Washington and state regulators escalate their scrutiny of Silicon Valley. Facebook chief executive Mark Zuckerberg is scheduled to testify in a congressional hearing on Monday focused on antitrust issues in the tech industry with the chief executives of Amazon, Google and Apple. (Amazon chief executive Jeff Bezos owns The Washington Post.)

Social networks are also under greater pressure to take responsibility for the content shared on their services, whether that's criminal activity or misinformation about elections. Hardy says the ad fraud issues are another facet of that larger debate. 

“We think the fraudulent ad issue should be addressed along with the other issues currently being raised – all generated by the evolution of the platforms and the growth in consumer usage and trust in the powerful brands,” Hardy said. “These issues are being raised in a discussion about what is the platform’s responsibility and how can we raise consumer awareness.”

Counterfeits and online fraud aren't new problems. 

The report notes fraudulent advertising isn't just limited to Facebook, saying it's also been an issue on other social networks including Google's YouTube and other popular websites. The activity is the latest sign that fraudsters are trying to stay a step ahead of regulation and other controls.

“The scam of using fraudulent advertising is a new gateway to an old problem,” said Hardy. 

There's increasingly been a push to crack down on online counterfeits and credit card fraud in Washington. The Trump administration and lawmakers have  raised concerns about the proliferation of counterfeit goods for sale on Amazon's platform, a topic that could come up at next week's antitrust hearing. 

Hardy says most of the proposed legislation so far doesn't specifically tackle the issue of digital advertising. He hopes lawmakers will do more to address the issue. 

Meanwhile, companies are putting pressure on the platforms to do more. 

The alliance's report calls for tech companies to adopt tighter controls to ensure advertisers are legitimate, such as collecting more data about a business or proof of business registration. They group calls for all advertisements to be reviewed before they're published online by algorithms and people. It also wants improved tools and forums for customers to share reports of ad fraud with the companies. 

Facebook says it has created tools to help companies report fraudulent content, but advertisers tell me they don't go far enough. Facebook also publishes its response to counterfeit goods in its transparency report. 

“We prohibit people from posting content that violates someone else’s intellectual property rights and review ads and commerce listings before they go live to make sure they comply with our policies,” said Facebook spokesman Andy Stone. "We have created multiple tools to help brands find and report potentially violating content and we take aggressive action to stop repeat violators, including disabling accounts."

Our top tabs

Joe Biden's campaign is criticizing the new election information labels Facebook rolled out this week.

Facebook yesterday appended a new label to posts from both President Trump and Joe Biden, the presumptive Democratic presidential nominee, Rachel Lerman reports. The company started last week to apply the label, which links to the federal government's website about absentee voting, to all posts from candidates running for federal office.

Facebook added the label to one of Trump's posts making misleading claims suggesting mail-in voting would lead to a rigged election. However, Facebook says the label will be applied to all posts regardless of their veracity. 

“Mail-In Voting, unless changed by the courts, will lead to the most CORRUPT ELECTION in our Nation’s History! #RIGGEDELECTION,” Trump posted early Tuesday morning.  Biden's post, which read “We have to vote Donald Trump out this November” and featured an image of a tweet with the same, language, solicited donations.

Biden spokesman Bill Russo criticized the company for giving the posts the same treatment:

Facebook said it will remove posts that suppress voting in the days ahead of the election. 

Roger McNamee, author of “Zucked: Waking Up to the Facebook Catastrophe" warned the label could give the posts greater credibility: 

Twitter, which added fact-check labels to previous Trump tweets accusing mail-in ballots of being fraudulent, did not label the post, citing its policy to not taken actions against “broad, nonspecific statements." 

Twitter is cracking down on QAnon conspiracy accounts due to an uptick in coordinated harassment.

Twitter has banned 7,000 related accounts and will limit content from approximately 150,000 others from circulating, my colleague Tim Elfrink reports. 

It's one of the most aggressive enforcement actions by a social media platform against followers of the right-wing conspiracy theory. QAnon followers allege that "deep state" actors seek to undermine Trump and that high profile celebrities and Democrats are involved in child sex trafficking.  

The FBI warned last year that QAnon will likely drive “both groups and individual extremists to carry out criminal or violent acts.” 

An increase in coordinated attacks by QAnon accounts on individuals, sometimes called “brigading,” also led Twitter to determine the accounts violated its harassment policies:

But as Joan Donovan, research director at the Shorenstein Center, points out, the content is still easily accessible on Facebook and YouTube:

The content is also still on TikTok, Ben and Brandy write.

Facebook is creating new teams to study racial bias on its platforms. 

It's a reversal from the company's prior stance limiting research into disparate racial impacts on the platform, Deepa Seetharaman and Jeff Horwitz report at The Wall Street Journal report

Instagram's new "equity and inclusion team" will examine how the company's algorithms affect black, Hispanic and other minority users compared to white users. Facebook is creating a similar team, Instagram confirmed. Both teams will consult with outside experts and civil-rights groups on how to conduct the research.

Facebook is facing pressure from advertisers to better address hate speech and other offensive content on its platform.

Users of both Facebook and Instagram have accused the company of disproportionately removing or censoring posts by users of color. But because Facebook does not explicitly track race, critics have struggled to prove their allegations.

An internal analysis last year found that Instagram users whose activities suggested they were black were 50 percent more likely to have their account disabled under changes considered by the company. The officials tweaked the changes but no further research was conducted. 

Apple, Facebook and Google scaled-down lobbying during the pandemic. 

Overall combined lobbying for the top five tech companies fell four percent. 

Amazon, meanwhile, increased its lobbying by one percent up to $4.4 million in the second quarter, Lauren Feiner at CNBC reports.  

Microsoft significantly increased its lobbying expenditures by 22 percent to a total of $2.9 million last quarter. That's more than the individual expenditures of Google ($1.7 million) and Apple ($1.5 million). Microsoft, which is the only of the top five not slated to testify in front of Congress over antitrust concerns on Monday, lobbied on issues including the EARN IT Act, a bill that critics warn could endanger encryption. 

Meanwhile, TikTok's parent company ByteDance more than doubled its spending to $500,000 in the last quarter. The company has beefed up its presence in D.C. as the president and some lawmakers now threaten to ban the app. They worry that TikTok could threaten national security by handing over the data of U.S. users to the Chinese government – something that TikTok says it has not been asked to do and would not do.

The company also announced plans to add 10,000 jobs in the U.S. over the next three years, Axios reports.

Lyft also increased spending to a record $530,000 during the pandemic. The company has lobbied for benefits for independent contractors as it faces lawsuits in both California and Massachusetts alleging it should provide its workers with employee benefits.

Rant and rave

Twitter found a new contender for most oblivious startup:

At least the copywriters didn't completely upsell it:

Many critics pointed out the business model risked pushing out Bay Area residents who can already barely afford to live in trailers:

And it would require rural Internet to actually work:

Tl;dr

Inside the industry

Industry group TechNet slammed two controversial White House immigration policies.

The group's president and chief Linda Moore blasted a White House memo that would bar undocumented immigrants from being counted in the part of the census that determines seats in the U.S. House

“Excluding undocumented immigrants from the apportionment count emanating from the Census only hurts our country’s ability to respond to the needs of those who live here and contribute to our communities," Moore said in a statement.

Members of the D.C.-based trade organization include Amazon, Apple, Google, Lyft, Oracle and Uber.

TechNet also joined a lawsuit filed yesterday led by the U.S. Chamber of Commerce seeking an injunction on the president's June order banning the entry of several nonimmigrant visa categories for six months. The lawsuit maintains that the proclamation “is inflicting severe economic harm on a wide range of American businesses across all economic sectors.” 

The lawsuit escalates tensions between the White House and tech leaders, who criticized the decision when it was announced last month.

More industry news:

Hill happenings

A House bill banning TikTok from federal phones passed with a veto-proof majority.

The package also imposed limits on the use of Department of Defense funds for technologies not vetted against algorithmic bias and granted subsidies to help U.S. companies compete with China for semi-conductor productions. The bill now faces the Senate.

More Hill news:

Workforce report

LinkedIn will cut nearly 1,000 jobs as a result of covid-19 fallout.

The Microsoft-owned company will cut about 6 percent of its workforce across its global sales and acquisitions team, Martin Mou and Ben Ottto at the Wall Street Journal report. Rising unemployment has hit the bottom line of the company, which makes much of its profits through ads and fees paid by recruiters. 

Other job recruiting sites have also felt the heat of rising unemployment. ZipRecruiter laid off or furloughed approximately one-third of its staff in March. Tech companies reliant on person-to-person physical interactions including Uber, Lyft and Airbnb have also slashed their staffs. 

But most of the largest tech companies have either weathered or profited from the pandemic. Both Amazon and Facebook have announced plans to hire more workers.

More workforce news:

Trending

Mentions

  • TechNet is promoting Peter Chandler to vice president of federal policy and government relations. He was previously director of federal policy and government relations.
  • Al Thompson has been named vice president of U.S. government relations at Intel, according to a news release.

Daybook

  • RightsCon will take place online on July 27-31.
  • The Senate Commerce Internet Subcommittee will hold a hearing to examine the state of United States spectrum policy Thursday at 10 a.m.
  • The Senate Commerce Committee will hold a hearing on The PACT Act and Section 230 on Tuesday at 10 a.m.

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‘Shrek’ walked so ‘Hamilton’ could run: