Britain's markets watchdog is investigating allegations that Facebook defrauded hundreds of thousands of UK firms who paid for adverts on the social media site.
The Competition and Markets Authority is looking into claims the tech giant provided inaccurate figures on how many consumers an advert on Facebook could reach.
Officials have been put on alert after a lawsuit in the US claiming Facebook inflated its 'potential reach' figures by up to 400 per cent.
Probe: The Competition and Markets Authority is looking into claims the tech giant provided inaccurate figures on how many consumers an advert on Facebook could reach
The CMA's new digital unit will use its research to create new rules forcing tech giants to be accurate and transparent with information given to advertisers
Labour MP Stella Creasy has raised concerns about Facebook's advertising tactics – and has asked the Department for Business, Energy and Industrial Strategy if the UK authorities will investigate Facebook's behaviour. Documents filed in the US case revealed that the UK's Advertising Standards Authority complained to Facebook that its 'potential reach' figure was misleading in December 2016.
In a letter to Business Minister Paul Scully, Creasy said: 'The documents reveal a worrying discussion within Facebook about internal knowledge of inaccuracy of its own data on 'potential reach' – data that is shown to potential buyers that those companies will use to inform spending decisions on their campaigns.
'I am concerned that the matters being raised...might also have affected hundreds of thousands of British businesses, including MPs, buying advertising on Facebook.'
She also asked if the Serious Fraud Office would probe 'apparently widespread fraud issues' in digital advertising.
The US legal action has been spearheaded by legal firm Cohen Milstein which in its claim says: 'Facebook employees acknowledged in internal documents that complaints about the potential reach being misleading have been made since approximately September 2015.'
The lawyers state that US marketing analyst the Video Advertising Bureau published a report on the issue in 2017, alleging the potential reach figure was inflated and even exceeded census numbers.
The legal documents say that Facebook's chief operating officer Sheryl Sandberg said in 2017: 'I thought we knew about this but we also recognised that when the self-reporting data was so different than the census, we knew we had to address it. I believe we still do.'
Facebook said of the US lawsuit: 'The allegations are without merit. Potential reach is a helpful campaign planning tool that advertisers are never billed on. It's an estimate. We make clear how it's calculated in our ads interface and Help Centre.'