Meta to pay up to $17.1 billion to settle landmark social media addiction claims

Meta reached a landmark settlement with 47 states, the District of Columbia and US territories on Wednesday, agreeing to pay up to $17.1 billion in fines and make major changes to its products over claims it put children at risk with addictive social media platforms.

In a dramatic capitulation, the owner of Facebook and Instagram agreed to financial penalties for violating federal child privacy laws and state consumer protection laws, the states announced. Meta also agreed to limit how long teenagers can spend on its platforms and to ban features that incite mental health issues, hitting the core of the company’s ad-focused business.

“The goal of this case was to protect our children: stopping alerts and notifications at night and when they’re at school, encouraging them to take breaks from social media, protecting them from harmful features,” Colorado Attorney General Phil Weiser said in a statement. He added that the deal goes beyond what most courts could order.

The settlement effectively ends a federal lawsuit in the U.S. Northern District of California in Oakland, where California, Colorado, Kentucky and New Jersey sought about $200 billion over allegations that Meta harmed children. The states submitted their agreement with Meta on Wednesday morning in this court, and Judge Yvonne Gonzalez Rogers approved it.

Separately, Meta said Wednesday it had settled with Texas for about $1 billion over similar allegations. The company still faces numerous other lawsuits from school districts and individuals, some of which are scheduled to go to trial in the coming months.

Meta shares rose on the news to close just above 1 percent. The company is valued at $1.47 trillion and most recently generated $60.8 billion in quarterly revenue.

The settlement could signal an inflection point for the social media industry, which has largely escaped regulatory scrutiny over the harm its products have caused to children. The amount, paid in installments over 10 years, is one of the highest ever achieved by a tech company in the States.

“A target wouldn’t settle until they see the writing on the wall and feel really exposed,” said Nora Freeman Engstrom, a law professor at Stanford University.

The full value of Meta’s payout depends on other social media companies also settling with states and agreeing to financial penalties and product changes. Meta will initially pay about $12 billion. It will pay an additional $5 billion if Snap, TikTok and YouTube also settle with the states and agree to financial penalties and product changes.

In a call with reporters on Wednesday, Meta’s legal team said the company negotiated settlement terms to require other companies to join and set industry standards that would not exclude Meta.

Meta wants to ensure that “teens have a safe and productive experience on our platforms” and has “partnered with attorneys general to set a new industry standard,” CJ Mahoney, Meta’s chief legal officer, wrote in a blog post. He urged other companies to match.

“This framework will only work if all our colleagues join us,” he added. “As teenagers move seamlessly across dozens of apps, we need an industry-wide solution.”

The settlement may also play a role in other legal claims against Meta, TikTok, YouTube and Snap, Snapchat’s owner. States, schools and teenagers have filed thousands of lawsuits against tech companies, accusing them of targeting young users with product features as addictive as cigarettes or digital casinos, drawing inspiration in part from the legal handbook used against Big Tobacco in the 1990s.

The tech companies said they added safety features for children and are protected by the law, Section 230 of the Communications Decency Act, which shields companies from liability for what their users post.

Some of the lawsuits were grouped into a series of personal injury cases filed by individual teenagers in California state court; some are scheduled for trial in October.

A separate group of federal cases is being heard in Oakland, which has included some states. School districts have also brought cases accusing the companies of public harassment for the costs schools have borne from their reliance on social media.

Meta has faced an uphill battle with some of these lawsuits. In March, Meta and YouTube lost their first personal injury case, paying $6 million in damages. Separately, a New Mexico judge this month ordered Meta to pay fines totaling nearly $1 billion in a case brought by prosecutors alleging violations of consumer protection laws.

Meta said it will continue to fight additional lawsuits and is confident it can dismiss any further personal injury claims.

The company’s decision to settle acknowledges its vulnerability as the trials shaped a negative narrative about its treatment of young users. Mark Zuckerberg, CEO of Meta, had to defend himself against evidence that he knew about the harm caused to children. He was expected to testify again at the trial in Oakland.

Last month, Meta said it spent about $2 billion in the second quarter alone to deal with its legal problems.

The settlement also ends a lawsuit filed by the Tennessee Attorney General against Meta for consumer protection violations.

The settlement effectively forces Meta to make major product changes for all US teen users. The company agreed to end infinite scrolling and introduce two-hour daily time limits on Instagram and Facebook. To prevent addictive use and sleep disruption, the company will limit use between midnight and 6 a.m. and silence notifications during school hours from 8 a.m. to 3 p.m.

The meta will also limit features that psychologists associate with negative social comparisons, such as beauty filters and counting likes. It will also strengthen age verification and parental control tools.

Many of the changes are similar to those Meta has made in the last year. The company has for years been committed to enforcing age requirements and creating technology that detects whether teenagers are lying about their age, but as part of the settlement, Meta said it would invest more in the effort.

The changes are “significant but not entirely revolutionary,” said Vincent Joralemon, director of the Life Sciences Law and Policy Center at the Berkeley Center for Law and Technology, adding that some restrictions already exist in Europe.

“I think the use of these platforms as a minor is going to look quite different than it did five years ago,” Mr Joralemon added. “There will be a lot more restrictions.

Still, prosecutors said the concessions were a big win.

“This is a monumental public health victory for young people in D.C. and across the country, and the safety features that Meta must install will fundamentally and immediately change the way young people use Instagram and Facebook,” said Brian Schwalb, Attorney General for the District of Columbia.

He noted that Meta was the first social media company to go head-to-head with the States, adding that it “won’t be the last.”

The agreement between Meta and the states also imposes stiffer penalties and higher costs if other social media companies reach similar agreements. For example, if YouTube and TikTok also settle lawsuits previously brought by the states, Meta would reduce its daily time limits on Instagram and Facebook to one hour from two.

The goal is to get other social media companies to agree to the same rules and create an industry standard that doesn’t overly penalize or single out Meta.

“Meta, while a major player in the industry and has seen tremendous harm to children’s mental health through its products and designs, is not the only player in the industry doing so, and others rightfully need to be held accountable,” California Attorney General Rob Bonta said in a call with reporters on Wednesday.

Snap and YouTube, which is owned by Alphabet, declined to comment. TikTok did not immediately respond to requests for comment.

A settlement with dozens of states would indicate that for Meta, “the cost of maintaining endless scrolling, autoplay, filters, etc. is too much of a risk for society,” said Stuart Benjamin, a professor at Duke School of Law and co-director of Duke’s Center for Innovation Policy. “And they came to the conclusion that they just had to end the risk one way or another.”

Separately, Meta’s settlement with Texas requires the company to make product changes similar to those in the settlement with other states. That $1 billion will help fund things like youth mental health services and grants for Texas schools, the state said in a news release.

The deal brings Meta’s combined settlement with the states to more than $18 billion.

Emmett Lindner and Kate Conger contributed reporting.