As Facebook seeks legal immunity, Forrest’s lawsuits reveal deep challenges

Facebook makes around $5 billion annually in advertising revenue from the Australian market, as estimated by the Australian Competition and Consumer Commission, placing it ahead of corporate giants like Macquarie or Harvey Norman. Yet unlike these companies, Facebook is relying on an extraordinary claim to dodge litigation: that it does not do business in Australia.

It’s being argued in two courts this week that Facebook has the modern-day equivalent of sovereign immunity — rex non potest peccare, or “the King can do no wrong”. This sort of law dates back to at least Roman jurisprudence and finds expression for emperors, monarchs and sovereign governments even today.

The situation originated when, in 1996, the Clinton administration gave broad immunity from liability to internet companies in a bid to promote the development of the internet, then a promising new technology. The immunity continues today, and companies like Facebook structure their global operations to take advantage of it.

Facebook has deployed highly unusual legal structures to export this US immunity to its global business. To many people’s surprise, the Facebook Australia platform is run by Meta Platforms Inc (an American company), which has this immunity under US law. Facebook Ireland Ltd, also run by Facebook executives in Menlo Park, contracts with Australian advertisers — neither of these entities have any legal presence in Australia and deny they do business here. As for Facebook Australia Pty Ltd, it has no operational control over the platform and is relegated to a “reseller of advertising space”, presumably to satisfy the tax departments. 

We know this from the documents released in Australian businessman Andrew Forrest’s dual action case against Facebook in American and Australian courts. Forrest’s complaint centres on the company’s advertising business and how readily scam ads flow across the Facebook platform. Specifically, Forrest alleges that Meta’s advertising business “routinely produces fraudulent ads”, using the likeness of various public figures, including himself.  

Facebook’s response to public interest scrutiny on its harmful ads practices generally follows the tobacco and oil playbook: to attack the credibility of the researchers and rely on backgrounding tactics in an attempt to kill stories. The cynicism of characterising research organisations as bad-faith actors while Facebook’s Australian office relies on legal inventiveness to fictionalise itself out of genuine accountability is truly extraordinary.

The harms that Facebook’s ads business appears to create, however, are far from fictional. Australians are swindled out of millions of dollars per year from fraudulent ads, which are supercharged in distribution and precision from the underdiscussed and underscrutinised behemoth that is the “Meta Ads Manager”.

Love him or loathe him, Dr Forrest’s dogged pursuit of a legal remedy from Facebook has exposed some alarming and inconvenient truths. Australians would be surprised to learn that social media companies operate with such an advantage and immunity — and, worse, that they can because of a US law that Australians are powerless to do anything about.

If the Forrest litigation fails, Australians are staring down the reality of continued unchecked legal immunity for a serial online harm offender, one that cannot be compelled by current Australian law to fix the platform.

Facebook oversees a range of systems on its platform that appear to create safety and wellbeing risks for Australians. In Facebook’s advertising business — which includes the “ads approval” and “ads manager” systems — the company has routinely failed basic safety tests (see a recent Reset.Tech experiment), demonstrating how little mitigations exist to prevent bad-faith advertisers from profiting off harming vulnerable Australians.

Forrest’s litigation alleges this is a direct consequence of failed “know your customer” checks, of inadequate resources, insufficient computational power to cope with AI-empowered fraud, and notoriously poor security allowing the hacking of its own marketers and user accounts.

Forrest’s claim in California argues that Facebook’s immunity from liability is the reason why it spends too little of its revenue fixing the fraud now rampant on its platform. The immunity, intended to shield internet companies in the United States from publisher’s liability for user content — basically defamation — has long been extended by compliant Californian courts to almost every facet of internet business. This results in shielding Facebook from liability for what it does in Australia, with the practical effect that Australian litigants are captive to a US law passed in 1996. 

The Albanese government has faced increasing calls to take a more muscular approach with social media companies and move out of voluntary schemes and light-touch regulation towards proper enforcement mechanisms. Yet should these jurisdictional loopholes remain, even the most robust-seeming laws may be voluntary for Facebook too.