Meta agreed to pay up to $18 billion and to change how teens use Instagram and Facebook, ending a landmark US trial over social media addiction. Wall Street welcomed the resolution, with Meta shares rising above $578 in late trading.
Meta ended a four-day federal jury trial in Oakland on Wednesday by agreeing to pay up to $18 billion to settle claims from California and 28 other states that it built addictive products that harmed children. The company also agreed to platform changes, including daily usage limits and blocks on nighttime use nationwide in the US.
The states had accused Meta of designing Instagram and Facebook to hook young users, contributing to anxiety, depression and suicide, and of collecting data on children under 13 without parental consent. Meta denies wrongdoing under the settlement.
States split the payout over a decade
The $18 billion will be divided among the states over 10 years, subject to court approval. California is set to receive between $1.5 billion and $2.1 billion, and Colorado about $615 million. Colorado attorney general Phil Weiser said the relief goes well beyond what any court had ordered.
Meta's chief legal officer, CJ Mahoney, said in a statement that the deal only works if rivals follow suit, saying "we need an industry-wide solution" and calling on TikTok, Snap and YouTube to adopt the same framework.
Jefferies calls it a clearing event
CNBC reported that Meta shares rose about 1.5% in late trading Wednesday, above $578, as investors welcomed a resolution that had hung over the stock since 2023.
BMO Capital Markets analyst Brian Pitz kept his rating at "market perform" with a $580 price target, noting the new usage limits and nighttime blocks are likely to affect user engagement and ad load. TD Cowen's Paul Gallant cautioned that the settlement does not cover thousands of individual plaintiffs' mental health claims, which could still prove costly.
Meta, YouTube, TikTok and Snap still face thousands of similar lawsuits from families, school districts and other state attorneys general. Meta and YouTube previously lost the first such case in February and were ordered to pay $6 million to the plaintiff. Meta was separately ordered to pay nearly $1 billion to New Mexico over child sexual exploitation on its platforms.
Sources: The Guardian, CNBC
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