States seek $1.4 trillion -- yes, trillion -- from Meta over alleged harm to kids

A trial is set to begin Tuesday in federal court in Oakland, California as four states are pushing for Meta to pay $1.4 trillion over allegations that its platform is addictive for underage users. 

Four states — California, Colorado, Kentucky and New Jersey — are seeking extensive financial damages that could, in theory, total as much as $1.4 trillion, plus changes to how the company operates Facebook and Instagram. Another 25 states have sued Meta in federal court and are expected to have trials.

The backstory:

The lawsuit accuses the social media giant of violating the federal Children's Online Privacy Protection Act by gathering data from children without parental consent and contributing to the youth mental health crisis by knowingly and deliberately designing features that get children addicted to its platforms. 

The other side:

Meta has denied the accusation, arguing that the attorneys general lack ‌evidence that it ⁠misled the public about its platforms' alleged addictiveness because social media addiction is not a psychiatric condition.

New Mexico judge orders Meta to pay $567 million for youth mental health treatment

By the numbers:

Earlier this month, a New Mexico judge ordered Meta to pay $567 million to confront the impact their platforms have had on young users.   The order directed $420 million toward treatment programs for young people and allocated the rest to prevention, screening and other support efforts over the next five years.

The ruling follows a March verdict in which jurors levied $375 million in civil penalties after concluding Meta concealed internal warnings about mental-health harms and child sexual exploitation on their platforms. Collectively, the technology company is now responsible for $942 million, only a fraction of their annual profit. 

The Associated Press reports that Meta reported a rare profit decline last month, in part due to $2.4 billion in legal expenses.

The $1.4 trillion figure, which Meta disclosed in a legal filing, is almost as high as the Menlo Park, California, company’s entire market capitalization — that is, the value of all its outstanding shares on the stock market. Paying it would inevitably put Meta Platforms in bankruptcy and perhaps put the company under state ownership.

What they're saying:

Meta calls the possible penalty "untethered to any claimed violation" by the states.

"A sanction of that size has no analog in the history of consumer protection enforcement," Meta said in a July 6 filing with the U.S. District Court for the Northern District of California.

If Meta loses the trial, the court would have wide discretion over the size of any financial penalty, and legal experts say anything close to $1.4 trillion would be unlikely.

"It’s not plausible in the sense that Meta doesn’t have that much money and could not get it," said James Grimmelmann, a law professor at Cornell Law School and Cornell Tech. "An award that large would put Meta into bankruptcy, wipe out its owners, and effectively result in the states owning Meta."

Changes to Facebook and Instagram coming

Why you should care:

In the New Mexico ruling, the judge directed Meta to overhaul how Facebook and Instagram present safety information, requiring recurring banners and instructional screens that explain privacy tools, protections and ways to address inappropriate interactions. Those changes will later be reviewed by the state of New Mexico. 

Age verification on Meta is limited by federal privacy laws, so they cannot require children under 13 to submit personal data. So the court ordered the company to continue to improve age assurance systems in New Mexico, including using AI models that can estimate a users age based on social connections and content consumption. A "under-13-years-of-age prediction model" within two years is their ideal goal. 

 

Technology