The Meta settlement is regulation by enforcement
Last week, the social media group Meta, facing the prospect of putting chief executive Mark Zuckerberg on the stand to testify about its efforts to hook young Instagram users, opted to cut a deal.
The company settled claims it had addicted and endangered children by agreeing to pay a total of up to $18bn to 48 states and Washington DC. It will also impose default daily limits and night-time blocks for teenagers. The penalties are among the largest ever paid by a single company, though far short of the $1.4tn the states were seeking.
What made the deal particularly unusual was that $5bn of the money, and the tightest restrictions — a one-hour daily limit — will come into play only if the states strike similar agreements with Instagram’s biggest rivals for youth attention, including TikTok and YouTube.
Both sides are essentially betting they can shame the wider social media industry into accepting nationwide curbs on youth social media use.
Meta, which had already lost a prior trial in New Mexico and owes that state nearly $1bn, wants a wider deal lest it end up as the only company officially tagged with being a “public nuisance”. The extra penalty money is dwarfed by Meta’s $1.5tn market cap, and it can live with one-hour usage limits as long as others face them too. Polling suggests teenagers only use Instagram one hour a day, versus 1.5 or two for its rivals.
The state attorneys-general who brought the case are explicit about their goals, which cross party lines. Democrat Phil Weiser of Colorado boasted that “the settlement with Meta could set the standard for the industry” and Republican Chris Carr of Georgia warned, “while Meta is the first to come to the table, they shouldn’t be the last.”
If this sounds like regulation by enforcement, that’s because it is. Three in five Americans support tighter social controls in general and two-thirds want mandatory age verification. But Congress and the Trump administration have proved reluctant or unable to do anything at all to limit social media use.
So the state AGs, many of them elected officials, have responded to public demand. They cannot write regulations, but they can bring legal cases and seek settlements that include new rules, and working as a group they can try to force nationwide change.
“My 100,000-ft view is that this is a success at actual governance. It will not be the last,” says James Tierney, a former Maine AG who now teaches courses on the role of state AGs in the federal system. “We’re going to see this in other industries and other fields.”
We already have in financial services, when federal officials failed to tackle Wall Street’s conflicts of interest during the dotcom bubble. New York’s Eliot Spitzer brought a case against Merrill Lynch and then worked with fellow AGs to investigate the other investment banks. They won a then-record $1.4bn settlement that rewrote the rules for sell-side research.
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Like Spitzer’s critics, some opponents call the current Meta deal a misguided use of state enforcement power. They argue state AGs should leave policymaking to federal regulators and the legislature. In this view, state politicians and a single company saddled with embarrassing emails should not set national policy, and the rules that result are problematic because they have not been tested in a public process.
“State AGs are not the best decision makers for the internet. They don’t see the national picture,” says Eric Goldman, a Santa Clara University law professor. There is “no science backing that two-hour limits are right . . . They’ve completely made it up.”
Even if, like me, you believe that governments should be doing more to protect young people from social media ills, it is hard to argue that multi-state settlements are the ideal route.
The Meta talks started months ago and reached a deal only after the trial started. The company told me that one of the biggest challenges was dealing with dozens of AGs from both parties and added that they were happy to get 48 on board.
Even that success papers over the fact that Texas refused to join the other 47 and struck a separate $1bn deal, and Meta’s legal troubles are not over. Florida’s AG called the payout “peanuts” and vowed to go to trial. The company is also appealing its New Mexico loss.
In financial services in the 2000s, the path to a national resolution included the US Securities and Exchange Commission. The SEC brought its regulatory experience to the table and helped ensure that the new strictures on analysts would apply nationally.
Now that social media companies are facing regulation by piecemeal state enforcement, they should rethink their views on national rules.
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