Meta has agreed to pay a maximum of $16.68bn to settle claims brought by states across the country. They alleged the company designed Facebook and Instagram to addict children, misled consumers about their safety, and improperly collected the personal data of children who used its platforms.
Diana Novak Jones reported the figure for Reuters on Wednesday, from the court papers. The two sides struck the agreement during the trial itself, now in its second week at the federal court in Oakland, California. It averts the rest of that trial. Meta denied wrongdoing in agreeing to settle.
Meta shares rose 4.4% in pre-market trading, Reuters reported.
What Meta has agreed to change
A court filing released on Wednesday sets out the terms. It describes them as a proposed consent judgement. Meta will introduce daily usage limits and nighttime blocks for teenage users of Facebook and Instagram, nationwide. It will also add what the filing calls enhanced age assurance measures, which aim to keep children off the apps. Further tools for parents and guardians form part of the deal.
All parties waive their rights to appeal once the court enters what it deems Final Judgment. Jonathan Vanian reported that for CNBC from the filing.
What the states alleged
The four states leading the case are California, Colorado, Kentucky and New Jersey. California Attorney General Rob Bonta co-led it with the attorneys general of the other three.
They alleged Meta designed Facebook and Instagram to addict children and misled consumers about how safe the platforms were.
All 29 states alleged Meta breached the federal Children’s Online Privacy Protection Act. It collected personal data from users it knew were children, they said, and never notified parents or asked their consent.
The same claim covers what Meta then did with that data. The states said the company used it to train machine learning and generative AI models.
The combined case stems from a lawsuit filed in 2023. The case is People of the State of California v. Meta Platforms Inc., 23-cv-05448, in the Northern District of California.
The figures on the table before today
Meta said in a pre-trial filing that the four states were seeking up to $1.4 trillion in penalties. The states indicated the figure was closer to $200bn. We covered those numbers when the trial opened.
The states wanted more than money. They sought additional damages, an order forcing major changes to the platforms, and a bar on children creating accounts at all.
Meta has called the sums an outlandish payout and accused the attorneys general of demanding unreasonable design changes.
Where the trial had reached
Olivia Carville and Madlin Mekelburg broke the settlement talks for Bloomberg early on Wednesday, citing people familiar with them. We reported those talks the same morning.
Instagram head Adam Mosseri had testified on Monday and Tuesday. He said the percentage of teenagers using the Take a Break feature was in the low single digits before Instagram made it the default, and that most teens did not want it. He denied encouraging his team to hide anything. We covered that testimony on Tuesday.
Lawyers had said they expected to call Mark Zuckerberg. The trial had been expected to run six weeks, with an advisory verdict from the jury and the final decisions left to Judge Yvonne Gonzalez Rogers.
Meta’s defence at trial
Meta rejected the accusation that it sought to addict children. It said its own research showed no clear link between adolescent social media use and a lack of wellbeing.
On the misleading claim, it argued that it could not have misled consumers about whether its services were addictive. Social media addiction, the company said, is not a recognised psychiatric condition.
What this settlement does not end
Meta, Snap, Alphabet and ByteDance still face thousands of lawsuits in federal and state courts over the same allegations. Bloomberg counts more than 3,000 personal injury claims and about 1,300 school district suits.
Around 30 states have filed in state courts, according to court records. A separate trial against Meta has been running in Nashville since July.
Reuters reports that the federal cases sit consolidated before Judge Yvonne Gonzalez Rogers in Oakland. They include suits from individuals, school districts and state governments.
A judge in Los Angeles oversees thousands more brought by individuals who say the platform designs harmed them or their families.
Meta lost both phases of the New Mexico case. A jury ordered $375m in March, and on 6 August a judge found it had created a public nuisance and ordered $567m more.
Also in March, a Los Angeles jury found Meta and Google liable for the depression and anxiety of the plaintiff Kaley G.M. It ordered them to pay $6m in combined damages. The companies say they will appeal.
All four companies settled the first federal case set for trial, in which a Kentucky school district said they were liable for harm to students. Public records showed Breathitt County School District was set to receive a combined $27m.
The Ninth Circuit let 2,400 lawsuits proceed earlier this month.
The European position
The European Commission escalated its own investigation into Meta over addictive design aimed at children in July.
Australia and the United Kingdom have both moved on under-16 access. New Zealand said this week it will introduce a bill for a ban. A US consent judgement does not touch any of those measures.
The teenage limits Meta has agreed to apply nationwide in the United States. The filing does not extend them to Europe.
Meta’s stock has fallen nearly 14% this year, according to Bloomberg, and is on course for its first annual decline since 2022.
What to watch
The court has to enter final judgment before the appeal waivers take effect. The full terms sit in the filing, and the states have not yet said how the money will be divided or spent.
Zuckerberg sat on the witness list and never took the stand. The Nashville trial continues. Roughly 30 state court cases sit behind it, and Meta denied wrongdoing in this one.
Update: Meta has published its own account of the agreement
Meta set out the terms in a newsroom post on Wednesday. Its figures, and its description of who signed, differ from the court papers reported earlier.
The company describes the agreement as one with a bipartisan group of 52 attorneys general, covering US states, territories and the District of Columbia. The federal trial in Oakland involved claims from 29 states.
Meta puts the payment at approximately $18bn, paid in annual instalments across ten years.
That total splits in two. Participating states take roughly 70%, about $12.7bn, over the decade.
The remaining 30%, about $5.3bn, carries conditions. Meta says it releases that money only if YouTube and TikTok implement a one-hour daily limit, night mode and age assurance measures, and only if each of them pays a matching amount. Half of the held-back sum tracks YouTube and half tracks TikTok.
Meta expects to accrue a legal expense of approximately $10bn in the third quarter. That charge sat outside the expense range it gave on the second-quarter earnings call, the company says, and its other July guidance stands.
The teen protections apply to under-18s on Instagram and Facebook in participating states and territories, pending judicial approval. The daily limit is two hours, cumulative across both apps. Night mode runs midnight to 6am. School mode mutes notifications between 8am and 3pm. Direct messages sit outside all three.
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