Meta to pay $18 billion over accusations of social media harm to children

Claims against Meta had been accumulating for years. Authorities in American states accused the company of knowing about the dangers of its platforms for children, but continuing to use mechanisms that forced young users to return to Instagram and Facebook again and again.

A separate group of 29 states claimed that Meta illegally collected data on children under 13 years old.

Eventually, the case reached federal court in California. The attorneys general of California, Colorado, Kentucky, and New Jersey played a key role. They argued that it was not just about the side effects of social media popularity: in their opinion, Meta deliberately created its products to be addictive for young users.

The stakes were extremely high. The four states mentioned demanded about $200 billion from Meta, and among the company executives expected in court was Mark Zuckerberg. Instagram head Adam Mosseri had already testified.

But the case did not go to a full trial. Shortly after the proceedings began, Meta settled with the states.

As reported by Financial Times, according to court documents published on August 26, Meta agreed to pay $16.68 billion to 47 states, the District of Columbia, and three US territories. The company will pay another $1 billion to Texas as part of a separate agreement, bringing the total payments to almost $18 billion.

What will change for teenagers

As part of the agreement, Meta agreed to introduce standard daily time limits and night-time blocking for underage users of its social networks.

The company must also strengthen age verification to prevent children from accessing inappropriate content and give parents and guardians additional tools to control social media use.

These restrictions will not apply to WhatsApp and other Meta services primarily designed for messaging.

Meta's new control measures will not apply in Florida and New Mexico, which did not join the concluded agreement and therefore will not receive their share of payments.

Not all $18 billion will necessarily have to be paid by Meta. The company clarified that about $5.3 billion of the total will only be paid if Snap, the owner of Snapchat, TikTok, and YouTube, also settles with the states and agrees to financial penalties and product changes.

Meta explains this condition by stating that teenagers use many platforms simultaneously, so restrictions will be more effective if similar rules become industry-wide. Meta stated it would introduce stricter time limits and default night access restrictions if YouTube and TikTok agree to them.

The agreement itself also does not mean that Meta will immediately transfer the entire amount. Payments will be distributed over ten years.

How big is $18 billion for Meta

$18 billion is a huge sum even for one of the world's largest technology companies. But Meta's financial indicators provide a better understanding of its scale.

Last year, the company generated about $201 billion in revenue and over $60 billion in net profit. Thus, the maximum settlement amount is almost 30% of Meta's annual profit.

An even more telling comparison is with the last quarter: in three months, Meta earned $18.3 billion, effectively the same amount as the maximum cost of the current settlement.

But the company's expenses will not be limited to payments to the states. Meta estimates associated litigation and legal costs for the agreement at approximately another $10 billion. Thus, together with the maximum payments to the states, this story could theoretically cost the company up to $28 billion.

However, these funds will not have to be paid immediately: the settlement payments will be spread over ten years. Meta itself states that it does not expect a significant impact of the agreement on its quarterly financial results, partly because underage users contribute a relatively small portion of the company's revenue.

Pressure on social networks is growing

Meta is not the only tech company facing such claims. Numerous lawsuits have been filed against social networks in the US, related to the potential impact of their products on children.

In March, in another case in Los Angeles, Meta and Google were found responsible for creating programs that, according to the plaintiff, were designed to cause addiction in children.

At the same time, requirements for social networks are strengthening in various countries. Australia, European countries, the UK, and individual American states are introducing or preparing age restrictions for children and younger teenagers' access to Instagram, Snapchat, YouTube, TikTok, and other platforms.

Therefore, the current agreement with Meta may be significant not only for the company itself: whether its competitors will agree to similar terms could determine if new restrictions for minors become a common standard for the largest social platforms.

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