Analysis
Meta got off easy, but the settlement it reached could be a game-changer
The fact that in its biggest trial and against the most formidable plaintiffs, Meta managed to secure a cushy settlement - offers a glimpse of what lies ahead in the other cases: token payouts, commitments to modest changes, and business as usual
Mark Zuckerberg has done it again. Every time it seems that the sword hanging over Meta’s head is about to bring the company down, its founder and CEO somehow manages to slip through some devious loophole, come out on top and delight investors, who send the stock soaring. That was the case again today, in the massive lawsuit brought against Meta by 29 U.S. states.
Meta argued that losing the case could cost it a crippling $1.4 trillion fine. The states were more restrained, talking about a devastating $193 billion penalty. And the final result? An $18 billion settlement, perhaps even less, to be paid over 10 years. By a company that reported net income of $18.34 billion in just the most recent quarter. If we - and our children - were not the ones who had suffered the most, we would be rolling on the floor laughing.
It is one of the largest settlements ever reached by a technology company in the United States. But for Meta, it amounts to little more than a slap on the wrist - a sum smaller than the company’s net profit in the previous quarter. The pill is even less bitter given that Meta will pay the amount over a decade. It also pales in comparison with the excess revenues and profits Meta has generated over the decades from increased activity by young users as a result of its addictive features and its increasingly precise ad targeting, made possible by the information it collected about them.
As in other cases - such as the $400 million fine TikTok received last week for violating the privacy of young users, or the fines of several billion dollars imposed on tech giants in the European Union for harming competition - this is little more than the cost of doing business. The companies generate substantial immediate revenues by bending and blatantly violating the law. If they are caught and punished, it happens years later, and the penalty is always lower than the revenues they generated as a result of their behavior.
It is no wonder that Meta’s stock is rising in response to the supposedly historic settlement: Investors understood perfectly well that the company is paying a small price to get rid of a significant threat, emerging with the upper hand and receiving what amounts to a green light to continue its problematic practices in other areas.
Nevertheless, experts say the settlement could mark a turning point for social media companies, which until now have operated without significant regulation over the potential harm they cause young users. “Meta reached a settlement because it saw the writing on the wall, and its exposure was very significant,” Stanford University law professor Nora Freeman Engstrom told The New York Times.
And the final word has still not been said as far as Meta and other social media companies are concerned - thousands more lawsuits remain pending in the United States. But the fact that in the biggest case, brought by the most powerful plaintiffs, the company reached such a lenient settlement points to what may lie ahead in the other cases as well: settlements involving symbolic sums, commitments to relatively modest changes, and business as usual.
The settlement was reached in a lawsuit that began last week, part of a series known as the “addiction lawsuits” — a term referring to thousands of cases brought by individuals, families and school districts across the U.S. against social media platforms including Meta, TikTok, YouTube and Snap. The plaintiffs argue that the platforms were designed to foster user addiction, particularly among young people, and have caused mental health and other harms.
The current lawsuit was led by the attorneys general of California, Colorado, Kentucky and New Jersey. They argued that Meta violated their states’ laws by designing Facebook and Instagram to encourage compulsive behavior and prolonged use among young users, while creating a false impression of their safety. The broader group of 29 states sued Meta, alleging that the company violated a federal law protecting children online by, among other things, collecting information from them without their parents’ consent.
Violating the law carries a $20,000 fine for each violation - a sum that could grow substantially given that Facebook and Instagram have millions of underage users and each user’s activity could involve multiple violations. According to Meta’s calculations, had the court ruled against it, the company could have been liable for $1.4 trillion - almost equal to Meta’s current market value, and an amount that could have pushed the company into bankruptcy. The states put forward a more realistic figure of $193 billion, which at the very least would have constituted a significant penalty and deterrent for other companies.
Ultimately, the settlement is far more modest, totaling up to $18 billion (covering not only the states that brought the lawsuit but all 50 U.S. states, as well as Washington, D.C.) — and even that amount will not be paid immediately. According to Meta, the company will pay the sum in annual installments over 10 years, with the participating states receiving at least $12.7 billion, or 70% of the settlement.
The remaining 30%, or $5.3 billion, will be paid only if YouTube and TikTok agree to two conditions: First, to pay a similar amount themselves, split equally between YouTube and TikTok. Second, to implement restrictions on young users similar to those Meta agreed to as part of the settlement, particularly a one-hour daily usage limit, a nighttime mode and enhanced age-verification features.
