Meta Platforms has agreed to pay out as much as $17 billion to settle state claims that it designed Facebook and Instagram to addict children, deceived consumers about the platforms’ safety, and collected personal data from children who used the platforms, according to court filings made public on Aug. 26.
The settlement comes after a federal trial began on Aug. 18 in Oakland, California, where the company denied allegations by 29 states that it deliberately tried to get children addicted to Facebook and Instagram.
The settlement reaches beyond the original 29 states. Attorneys general representing 47 states plus the District of Columbia, Puerto Rico, American Samoa, and the Northern Mariana Islands have joined the settlement.
The Meta agreement is the largest state consumer protection deal since the national tobacco settlement in 1998. In that case, major cigarette makers agreed to make payments to states in perpetuity, and more than $200 billion was paid out in the first 25 years. The companies also agreed to permanent restrictions on marketing their products to young people.
On Aug. 18, Meta had a total market capitalization of approximately $1.39 trillion. Its stock price rose after news of the settlement spread, pushing its total market capitalization by the close of trading on Aug. 26 to about $1.47 trillion.
Meta had estimated that it could face up to $1.4 trillion in penalties, although state attorneys general had said the figure could have been closer to $200 billion.
The states claimed that Meta misled consumers and designed Facebook and Instagram in such a way that they would hook young users, leading to increased anxiety, depression, and even suicide.
The 29 states alleged in their lawsuit that Meta has violated the federal Children’s Online Privacy Protection Act by collecting personal information from children younger than 13 without obtaining proper parental consent.
In the settlement, Meta has agreed to institute daily and nighttime usage limits for children who use its two social media platforms, as well as strengthen measures to prevent children from accessing age-restricted content.
California Attorney General Rob Bonta said Meta “agreed to make massive transformations that will reduce the risk of harm from its platforms—and will do it within months.”
“We are talking about time limits, stopping notifications during school, a block on the app during critical overnight hours, bans on plastic surgery filters, and so much more,” he said.
Some states have provided estimates of how much money they expect to be paid. The disbursements are to take place over a 10-year period.
Bonta said that California will take in between $1.5 billion and $2.1 billion.
New Jersey Attorney General Jennifer Davenport said her state will receive at least $525 million and possibly more than $752 million.
Kentucky Attorney General Russell Coleman said his state will receive $358 million.
Under the settlement, states receive a guaranteed portion and may receive what’s called a contingent portion. That portion is dependent on whether TikTok and YouTube settle the claims against them on similar terms. If they do not settle, Meta gets to keep the contingent portion.
The settlement also covers lawsuits by California, Illinois, New Mexico, and the District of Columbia over privacy claims related to the Cambridge Analytica controversy. In that case, the consulting firm was accused of collecting personal data from millions of Facebook users. Those jurisdictions are slated to receive $459.3 million to resolve those legal actions.
Cambridge Analytica previously worked for then-presidential candidate Donald Trump’s 2016 campaign and had access to personal data from millions of Facebook accounts for purposes of targeting and profiling voters. The account holders didn’t consent, and their data were harvested through an app.
C.J. Mahoney, chief legal officer at Meta, said in a statement that the settlement will make its platforms safer for young people.
“The framework we’ve negotiated will empower parents to easily manage how their children access our platforms,” he said.
Mahoney said an industry-wide solution was still needed and urged TikTok and YouTube to implement the framework, which he said will work only if Meta is joined by its peers.
The settlement remains subject to court approval.
Reuters contributed to this report.
