Written supplementary evidence submitted by Financial Conduct Authority (OSB0229)


 

 


Damian Collins MP             
Chair
Draft Online Safety Bill Joint Committee


Copied to:             
The Rt Hon Nadine Dorries MP             
The Rt Hon Damian Hinds MP             
Chris Philp MP             

Via email             
 

              19 November 2021

              Our Ref:              C211119B             

 

Dear Mr Collins,

 

RE: Request for paid-for advertising recommendations

Thank you for inviting the Financial Conduct Authority (FCA) to give oral evidence to the Committee about the harm caused by fraudulent paid-for advertising on search engines and social media platforms.

In the Committee’s final session with Ministers and officials from the Department of Digital, Culture, Media and Sport, and the Home Office, the Minister for Technology and the Digital Economy asked the Committee to highlight if there was anything ‘‘really targeted at a particular part of the advertising space, maybe in connection with fraud, and is very important and very urgent but self-contained and targeted’’.

We have proposed amendments to the draft Bill which are both urgent, self-contained and targeted. 

In terms of urgency, fraud now accounts for one-in-three crimes in the UK, costing up to £190 billion a year.[1] An estimated 86% of fraud is committed online and this problem is growing.[2] In 2019, we issued 573 scam warnings. In 2020, that figure had grown to 1,185. In September, we had already published 79% more warnings than in 2020. Action Fraud has found that scam victims lost, on average, £82,000.

In terms of the need for amendments to be targeted and self-contained, we are conscious that expanding the scope of the companies captured by the draft Bill would not meet this test and would delay its passage. However, a simple, targeted and self-contained change that extends the existing requirements for user-generated fraud to paid-for advertising (for platforms already in-scope for the draft Bill), would go a long way to addressing one of the largest drivers of harm to UK citizens.



A report on online advertising commissioned by DCMS, published last year, found that 70% of online advertising spending went to search engines such as Google and Bing, and social media platforms like Facebook and Instagram.[3] These platforms are already within the scope of the Bill.

Applying the same systems, controls and oversight to paid-for fraud as those proposed for user-generated fraud should not pose undue problems for the platforms, given they will already have a level of engagement with the advertiser. A single regime should also be operationally easier for platforms to apply, and prevent consumers from being unable to distinguish between what they can and cannot trust on search engines and social media platforms.

The safety obligations within the draft Bill could then be strengthened as they relate to online advertising. Unlike user-generated content, there would be no need to limit the obligation of platforms to only minimising the time that fraudulent content remains online: The obligation should be to prevent it appearing at all.

The Online Advertising Programme will still have an important role to play. Forms of Open Display advertising, e.g. banner ads that consumers may find in the sidebar of a newspaper’s website, are currently out-of-scope for the Bill. The report commissioned by the DCMS concluded that Open Display market practices are likely to change when Google Chrome phases out third-party cookies by 2022.

As such, the Online Advertising Programme is best placed to look at this rapidly-changing market and consider how to align protections and standards with those that we hope to see in the Online Safety Bill.

We have been discussing the operational aspects of the targeted amendment set out in this letter with Ofcom and DCMS and would be happy to provide any additional information the Committee may find useful.             

Yours sincerely,             

Nikhil Rathi             
Chief Executive

 

24 November 2021


[1] https://www.crowe.com/uk/croweuk/-/media/Crowe/Firms/Europe/uk/CroweUK/PDF-publications/Annual-Fraud-Indicator-report-2017

[2] Home Office, Fraud Review – Headline Findings, February 2020

[3] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/777996/Plum_DCMS_Online_Advertising_in_the_UK.pdf