Meta got off cheap, but the settlement it reached may change the rules of the game
Meta has reached an $18 billion settlement in a massive lawsuit brought by 29 US states over claims that its platforms were designed to cause addiction among young users. The payment will be spread over 10 years.
Mark Zuckerberg has done it again. Every time it seems that the sword hanging over Meta's head is about to finish off the company, the founder and CEO manages to escape through some devious hole, come out on top, and please the investors who send the stock soaring. This was also the case today, in the massive lawsuit managed against Meta by 29 states in the USA.
Meta claimed that losing the trial could cost it a paralyzing fine of 1.4 trillion dollars. The states were more moderate and spoke of a crushing fine of 193 billion dollars. And the final result? A settlement agreement of 18 billion dollars, to be paid over 10 years. From a company that just last quarter recorded a net profit of 18.34 billion dollars, this is a modest outcome.
The agreement was signed in a trial that opened last week, part of a series of "addiction trials," a nickname for thousands of lawsuits filed by private plaintiffs, families, and school districts in the USA against social media platforms – Meta, TikTok, YouTube, and Snap – claiming they were designed to cause user addiction, particularly among the young, and led to mental and other injuries. The current lawsuit was led by the attorneys general of California, Colorado, Kentucky, and New Jersey. According to them, Meta violated their states' laws when it designed Facebook and Instagram to encourage compulsive behavior and prolonged use by young users, while creating a false representation regarding their safety.
The broader group of 29 states sued Meta claiming that the company violated a federal law for the protection of children online by, among other things, collecting information from them without their parents' consent. A violation of the law involves a fine of 20 thousand dollars per violation – a sum that could grow significantly considering that Facebook and Instagram have millions of minor users. In the end, the settlement agreement is much more modest and stands at 18 billion dollars at most (which encompasses all 50 states in the USA, as well as Washington D.C.).
According to Meta, the company will pay the sum in annual installments over 10 years, and the participating states will receive at least 12.7 billion dollars, 70% of the agreement amount. The remaining 30%, 5.3 billion dollars, will be paid only if YouTube and TikTok agree to two conditions: first, to pay a similar sum themselves. Second, to implement restrictions on young people's use that will be similar to those Meta committed to, in particular a daily usage limit of one hour, night mode, and improved features for age verification.
But from Meta's perspective, it is no more than a slap on the wrist, a sum that is lower than the company's net profit last quarter. It pales in comparison to the revenues and excess profits that Meta has recorded over the decades from the increased activity of young users. As in other cases – like the 400 million dollar fine that TikTok absorbed last week for harming the privacy of young users, or fines of several billion dollars that tech giants absorbed in the European Union – it is no more than the cost of doing business. The companies generate significant immediate revenues from bending and blatantly violating the laws, and the punishment is always lower than the revenues generated.
However, according to experts, the settlement agreement could constitute a turning point in terms of social media companies, which until now have operated without significant regulation around the potential damage they cause to young users. "Meta reached a settlement agreement because it saw the writing on the wall, and the position is very exposed," Prof. Nora Freeman Engstrom, a law professor at Stanford University, told The New York Times. And yet the last word has not been said in terms of Meta and the other social media companies – there are still thousands of trials on the agenda in the USA. But the fact that in the largest trial, with the strongest plaintiffs, the company reached such a caressing settlement agreement, points to what is expected in the other trials as well: agreements on symbolic sums, commitment to non-dramatic changes, and business as usual.
