Meta Agrees to Pay Up To $18 Billion to Settle US Social Media Claims

Meta Platforms Inc. has agreed to pay up to $18 billion to settle social media claims brought by US states, under a landmark agreement that would also require major changes to how the company operates Facebook and Instagram.

 

Key terms of the deal, disclosed in a court filing on Wednesday, require Meta to introduce new safeguards on its platforms, including restricting the amount of time young users can scroll and preventing them from disabling certain safety settings without parental consent.

 

The agreement includes payments to resolve various claims across multiple lawsuits. At the centre of the dispute was an ongoing trial in Oakland, California, in which several US states alleged that Meta deliberately designed Facebook and Instagram to encourage compulsive use among young users.

 

Meta has agreed to pay up to $16.7 billion to resolve that lawsuit, according to the court filing. The company will also pay another $459 million to settle other privacy claims, as well as $75 million in legal fees. Separately, Meta said it had reached an agreement to pay Texas up to $1 billion.

 

Some of the payments are contingent on other social media companies adopting similar platform changes and making their own settlement payments.

 

US District Judge Yvonne Gonzalez Rogers approved the agreement on Wednesday after suspending the trial earlier that day. In an earlier filing outlining the agreement, Meta denied the allegations and said the settlement did not constitute an admission of liability.

 

Oakland Trial

 

The agreement came during the second week of a jury trial in a California federal court that posed significant risks for Meta. The top legal officers of 29 states were seeking not only substantial financial penalties on behalf of the public, but also court orders requiring the company to change how it operates its platforms.

 

The states alleged violations of state consumer protection and federal privacy laws, which carry fines that can quickly accumulate when multiplied across millions of young Facebook and Instagram users. By Meta’s own calculations, a loss at trial could have exposed it to penalties of as much as $1.4 trillion, an amount close to its market capitalisation and unprecedented in legal history.

 

Meta shares closed 1.1 per cent higher on Wednesday. Bloomberg reported late Tuesday that the parties had discussed a possible settlement during the trial.

 

“Ensuring teens have a safe and productive experience on our platforms is an absolute imperative for Meta. We want to get this right for parents and teens,” the company said in a statement on Wednesday.

 

Meta also said the agreement included default blocks on access to its apps at night and muted notifications during school hours.

 

The settlement provides for the appointment of an independent auditor to oversee compliance. The auditor can issue recommendations and report findings to the states. The agreement also requires Meta to enhance its age-verification tools to better identify young users on its platforms. Access to features such as viewing the number of likes on a post and using beauty filters will be restricted for teenagers.

 

“Meta has agreed to make massive transformations that will reduce the risk of harm from its platforms — and will do it within months,” California Attorney General Rob Bonta said in a statement.

 

Settlement Structure

 

The settlement does not require Meta to immediately pay the full value of the deal. Under the agreement, Meta is required to pay the states a total of $12.19 billion over 10 years.

 

That amount will increase to the full $17.1 billion value of the settlement only if Alphabet Inc.’s YouTube and TikTok also agree to platform changes and settlement payments, Meta said. Statements from several states indicated that Snap Inc. would also be subject to those terms.

 

During the first week of testimony, jurors heard from Instagram head Adam Mosseri and a number of current and former Meta employees who helped design its social media platforms and studied how teenagers interacted with tools intended to reduce problematic use.

 

Lawyers had also said they expected to call Meta founder and chief executive Mark Zuckerberg to testify.

 

The attorneys general leading the case from California, Colorado, Kentucky and New Jersey alleged under their respective state laws that Meta knowingly designed features that encouraged compulsive and prolonged use of its platforms by young people, while simultaneously misleading consumers about the safety features available on its platforms.

 

Meta argued at trial that it already had sufficient safeguards to curb problematic use by teenagers.

 

The broader bipartisan group of 29 states accused the company of collecting data from users under 13 in violation of the federal Children’s Online Privacy Protection Act.

 

Meta said on Wednesday that the agreement involved 52 attorneys general from US states, territories and Washington, DC, and would resolve active cases, including a trial in Tennessee that was already under way.

 

Social media companies are facing a global backlash over concerns that they profit at the expense of young users, amid growing research indicating that excessive screen time can have serious health and wellbeing consequences.

 

While authorities from Australia to Europe have enacted or proposed outright restrictions for young users in the past year, legislative efforts in the US have had limited success, making the courts a pivotal battleground.

 

Meta, Alphabet’s Google, Snap and TikTok all face billions of dollars in potential exposure from more than 3,000 personal injury claims brought by individuals and families in the US, as well as about 1,300 additional lawsuits filed by public school districts across the country.

 

Some cases have already been settled, avoiding trials, while more bellwether cases are expected to come before courts in the months ahead.

 

Lawyers behind the cases have gained traction by arguing that the products themselves — through their design and functionality — have caused harm, rather than focusing on content, for which platforms are broadly protected from liability.

 

This strategy, developed over several years, succeeded in its first major test when a Los Angeles jury in March awarded $6 million to a 20-year-old woman who said her nonstop use for more than a decade of platforms including Meta’s Instagram and Google’s YouTube had caused her anxiety, depression and body dysmorphia.

 

The Oakland trial followed a nearly $1 billion judgment against Meta in a case brought by New Mexico’s attorney general.

 

A state court judge in Santa Fe likened Meta to a polluting factory and ordered the company to make changes to its platforms, including time limits and restrictions on push notifications for young users. Meta was ordered to pay about $375 million in civil fines and $567 million to address social media-related harms to young people in the state.

 

The case is People of the State of California v. Meta Platforms Inc., 23-cv-05448, US District Court, Northern District of California (Oakland).