THE NEW YORK TIMES: Meta to pay up to $23.8 billion in landmark settlement over social media addiction claims

Meta on Wednesday reached a landmark settlement with 47 states, the District of Columbia and US territories, agreeing to pay up to $US17.1 billion ($23.8b) in penalties and make major changes to its products over claims it endangered children with addictive social media platforms.

In a dramatic capitulation, the owner of Facebook and Instagram agreed to the financial penalties for violating Federal child privacy and states’ consumer protection laws, the states announced. Meta also agreed to limit how long teenagers can spend on its platforms and to bans on features that stoke mental health issues, striking at the heart of the company’s business of engagement for advertising.

“The focus of this case was to protect our kids: stopping notifications and alerts at night and when they are in school, encouraging them to take breaks from social media, protecting them against harmful features,” Colorado Attorney General Phil Weiser said in a statement. The agreement exceeded what most courts might order, he added.

The settlement effectively ends a bellwether Federal trial in the US Northern District of California in Oakland, where California, Colorado, Kentucky and New Jersey were seeking roughly $200b over accusations that Meta harmed children. The states filed their agreement with Meta on Wednesday morning in that court, where Judge Yvonne Gonzalez Rogers is expected to approve it.

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

Meta’s stock price rose 1.3 per cent on the news. The company is valued at $1.47 trillion and most recently generated $60.8b in quarterly revenue.

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

“Meta wouldn’t settle unless it sees the writing on the wall and feels really exposed,” said Nora Freeman Engstrom, a law professor at Stanford University.

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

In a call with reporters Wednesday, Meta’s legal team said the company negotiated the terms of its settlement to require the other companies to join, setting industry standards that would not single out Meta.

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

“This framework will only work if all our peers join us,” he added. “Because teens move fluidly across dozens of apps, we need an industry-wide solution.”

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

The tech companies have argued that they have added safety features for children and are protected by a 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 bellwether personal injury cases brought 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, of which some states were a part. School districts have also brought cases accusing the companies of public nuisance for the costs that schools have shouldered from social media addiction.

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 ordered Meta this month to pay penalties totalling nearly $1b in a case brought by the state attorney general for violations of consumer protection laws.

Meta said it will continue to fight the other lawsuits, and that it is confident it can quash any additional personal injury claims.

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

Last month, Meta said it had spent about $2 billion in the second quarter alone to handle its legal challenges.

The agreement also ends a trial brought by Tennessee’s state attorney general against Meta for consumer protection violations.

The settlement will effectively force Meta to make major product changes for all US teen users. The company agreed to interrupt endless scrolling and to impose two-hour daily time limits on Instagram and Facebook. To avoid addictive use and sleep interruptions, the company will limit usage between midnight and 6am and silence notifications during school hours of 8am to 3pm

Meta will also limit features that psychologists link to negative social comparisons, such as beauty filters and a tallying of the “like” button clicks. It will also strengthen age verification tools and parental controls.

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

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

“I do think that using these platforms as a minor will start to look pretty different than it did five years ago,” Mr Joralemon added.

“There are going to be a lot more restrictions.”

Still, state attorneys general said the concessions were a big win.

“This is a monumental public health victory for young people in DC and across the country, and the safety features Meta is required to install will fundamentally and immediately change how young people use Instagram and Facebook,” Brian Schwalb, the attorney general of the District of Columbia, said in a statement.

He noted that Meta was the first social media company to settle with the states, and added that it “will not be the last.”

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

The aim is to pressure the other social media companies into agreeing to the same rules, creating an industry standard that doesn’t overly penalise or single out Meta.

“Meta, while they are a major player in the industry and they have visited enormous mental health harms on kids through their products and their designs, they are not the only player in the industry doing so, and others rightfully must be held accountable,” California Attorney General Rob Bonta said in a call with reporters 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 infinite scroll, auto play, filters, etc., is just too big a risk for the company,” said Stuart Benjamin, a professor at Duke School of Law and the co-director of Duke’s Center for Innovation Policy.

“And they have concluded that they’ve just got to end that risk one way or another.”

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

That agreement brings Meta’s combined settlements with states to over $18b.