How Meta’s $18 Billion Settlement Could Change Social Media

A flood of lawsuits against social media giants claim that by engineering their platforms to be hard to resist, the companies are causing serious harm to young users.

In a landmark nationwide settlement announced Aug. 26, Meta Platforms Inc. agreed to pay as much as $18 billion to resolve claims by state attorneys general over social media safety and privacy — one of the largest payouts in US legal history. The company will also be required to put new guardrails on its platforms, including restricting how much time youths can scroll on Instagram and Facebook and preventing them from switching off certain safety settings without parental consent.

Earlier this year, in the first personal injury case to go to trial, a Los Angeles jury in March found Meta and Google negligent in the design and operation of their platforms — awarding $6 million to a 20-year-old woman in a landmark verdict.

These historic trials, along with more to come in 2027, are drawing comparisons to Big Tobacco’s historic reckoning with consumer addiction three decades ago that resulted in tighter regulation of the cigarette industry.

What are the cases?

The Los Angeles trial centered on a woman who said her nonstop use for more than a decade of sites including Instagram and Google’s YouTube caused her to suffer anxiety, depression and body dysmorphia.

Snap Inc. and TikTok Inc. weren’t involved in that trial because they reached confidential settlements, but the four companies face more than 3,000 other cases brought by children, adolescents and young adults — sometimes via their parents, siblings or other family members — based on claims of psychological distress, physical impairment and death. Rather than targeting the content that social media users see, the suits attack the platforms’ design and functionality, alleging that they are engineered to keep users constantly engaged. The next in a series of so-called bellwether trials — which test each side’s arguments and sometimes generate settlements — is scheduled for October in Los Angeles.

New Mexico’s attorney general won judgments against Meta totaling $942 million this year following a jury verdict that the company misled youths about safety on its platforms.

The coalition of state attorneys general that reached a settlement with Meta alleged the company knowingly designed features that encouraged compulsive and prolonged use of its platforms by young people, while simultaneously misleading consumers about safety features on its platforms. Meta said the settlement involves 52 attorneys general from US states, territories and Washington, DC and would resolve active cases, including a trial in Tennessee that had been in progress.

Public school districts have brought more than 1,300 complaints on behalf of students. The cases claim the companies have created a “public nuisance” by distracting children and undermining their education and have caused a youth mental health crisis.

Meta, TikTok, Snap and Google agreed in May to pay a combined $27 million to settle a suit brought by a rural district in Kentucky that was scheduled to go to trial in June. The next school district trial is set for February.

How does the alleged addiction happen?

Many of the lawsuits allege that the social media giants, borrowing behavioral techniques from the gambling and cigarette industries, design endless, algorithm-generated feeds to induce young users into a so-called flow state. In that state, users react to incessant notifications that manipulate dopamine levels, encourage repetitive account checking and reward round-the-clock use.

Addictive use of social media results in an array of psychological disorders, and in extreme cases self-harm and suicide, according to the lawsuits. Such addictive use delivers the most valuable prize: troves of data about young users’ preferences, habits and behaviors that are used to target them with ads.

How are internal records at the companies being used against them?

In 2021, Frances Haugen, a former product manager-turned-whistleblower at Facebook, revealed internal documents showing that Meta had long known that its platforms had ill effects on young people, especially girls struggling with their body image. Lawyers at the Los Angeles trial showed internal chats and emails from employees discussing the alleged addictive qualities of Meta’s products. Much of the same evidence is being used at other trials.

Read more: Meta, Google Risk Big Tobacco-Like Fallout After Addiction Trial

Records disclosed by TikTok parent company ByteDance Ltd. in response to lawsuits suggest that the company knew young people were more susceptible to being lured into trying dangerous and even deadly stunts they view on TikTok because their ability to judge risk isn’t fully formed. Product research at ByteDance concluded that the top reason identified by teens for participating in the challenges is “getting views/likes/comments,” followed by “impressing others online.”

What do the companies say?

They maintain that their products were not built to hook kids, and that they have settings and safeguards in place to protect young users.

In a case brought by 29 state AGs in Oakland, California’s federal court that ended when Meta reached its settlement with states across the country, Meta argued it already had sufficient guardrails to curb problematic teen usage of its platforms. “Ensuring teens have a safe and productive experience on our platforms is an absolute imperative for Meta,” the company said in a statement, in which it denied wrongdoing.

Meta argued during the Los Angeles trial that social media actually helps young people connect with friends and family. Meta and Google are appealing the Los Angeles verdict and Meta is appealing the New Mexico verdict.

In the past, the first line of defense for social media companies has been Section 230 of the Communications Decency Act, the 1996 federal statute that shields companies from liability over comments, ads, pictures and videos on their platforms. But judges overseeing the current wave of lawsuits ruled that Section 230 doesn’t protect the companies from negligence claims.

What consequences are the companies facing?

In its August settlement with state AGs, Meta has agreed to pay as much as $16.7 billion to resolve the lawsuit being tried in Oakland, according to a court filing. By Meta’s own calculations, a loss at trial could have saddled it with penalties of as much as $1.4 trillion. In addition, the company will pay $459 million to resolve other privacy claims as well as $75 million in legal fees. Separately, Meta said it reached an agreement to pay Texas up to $1 billion.

In addition to restricting how much time teenagers can scroll and requiring parental consent to disable certain safety settings, Meta said that the agreement includes default blocks from its apps at night as well as muted notifications during school hours. The settlement includes the appointment of an independent auditor to oversee compliance.

The settlement includes an unusual and significant contingency provision. Meta committed to initially paying the states about $12.7 billion, but won’t pay the remainder unless its rivals agree to comparable payouts and similar platform changes. Meta and the attorneys general have launched a public pressure campaign to get TikTok, Google and Snap to commit to follow through.

In the Los Angeles trial, jurors said Meta must pay $4.2 million, and that Google owes $1.8 million. Half of each company’s payment is compensation for the plaintiff’s losses, including the cost of therapy, and the other half is punitive damages, meant to punish wrongdoing and discourage similar conduct in the future. That was the first of a handful of test cases selected to proceed to trial to help assess the strength of the legal arguments behind the thousands of other suits.

The suits filed by the school districts seek to recover past and future costs tied to the alleged harms of social media, including funding to hire additional mental health counselors and security guards and additional training for teachers to help them identify and respond to students suffering distress. Bloomberg Intelligence has estimated the companies’ collective exposure is almost $400 billion.

The school districts are also demanding that the companies make adjustments to the platforms, including installing parental controls and tweaking algorithms that are designed to maximize user engagement.