Meta Settles Youth Addiction Case for $18B

Meta Platforms has agreed to pay up to $18 billion over the next decade to settle a lawsuit brought by 47 states, D.C., and three U.S. territories, alleging that Facebook and Instagram were designed to addict children. The agreement includes significant changes to the platforms, such as daily usage limits for minors and nighttime restrictions on access.

The settlement resolves claims that Meta misled consumers about safety risks, improperly collected data from users under 13, and shared certain user information with third parties like Cambridge Analytica in the lead-up to the 2016 election. According to multiple reports, Meta will implement provisions like limiting teens' use of Facebook and Instagram to two hours a day and blocking all usage from midnight to 6 a.m., absent parental consent. The settlement also includes age-checking measures and disabling push notifications during school hours for teenage users.

Michigan Attorney General Dana Nessel announced that the state could receive at least $171 million if the court approves the settlement. The lawsuit was part of a broader wave of litigation alleging that social media companies have contributed to a nationwide youth mental health crisis. Meta has denied wrongdoing but agreed to implement new child-safety measures as part of the settlement.

The trial involving the initial 29 states began last week in a federal court in Oakland, California. Michigan Attorney General Dana Nessel expressed hope that this settlement would mark a turning point for prioritizing children's safety over profit in the social media industry. The agreement still requires approval from Judge Yvonne Gonzalez Rogers.

As reported by TimesLIVE, Meta will not undergo a fundamental overhaul but will restrict teenagers’ use of Facebook and Instagram to two hours a day and block all usage from midnight to 6am if parental consent is absent. The limits could be tightened if the social media platforms Snapchat, TikTok, and YouTube adopt similar terms. California could receive a $2.2 billion payout, while New York could receive $1.1 billion.

Meta shares rose as much as 4.1%, and closed up 1.1%. The settlement includes guaranteed payments of about $12.7bn, with another $5bn contingent on whether Snap Inc’s Snapchat, ByteDance’s TikTok, and Alphabet’s YouTube impose similar protections for children.

Meta's landmark settlement in its child safety trial will precipitate the most significant change to its social media platforms for teen users ever. The social media giant's settlement with more than 40 states plus the District of Columbia and multiple territories includes up to $17 billion in payments over 10 years, changes to the apps for teens, and stricter age assurances. California Attorney General Rob Bonta, who led the trial, told CNBC that $17 billion can do a lot of good to prevent and remediate mental health harms for kids.

The settlement includes a two-hour default limit for time spent on its app, blocking the apps between midnight and 6 a.m., and muting notifications during school hours. Teen users will also have likes hidden, cosmetic filters disabled, and the option to control autoplay of videos as well as the ability to opt for a non-algorithmic feed.

Meta said it'll roll out many of the default protections in the next six months, but it will take up to a year to introduce age assurances — stricter age verification requirements to keep kids off its platforms and accurately identify teens who have lied about their age. To address this complex problem, Meta is building a new prediction model to determine users who are under 13 or in the range of 13-17 by pulling in data like who they're connected to, who they follow and who their followers are, as well as the likes of happy birthday greetings.

Age verification — especially without facial recognition, which Meta doesn't use — is notoriously tough. The challenge has prompted a debate between Meta and app store owners Apple and Google about which entity should be responsible. Meta has also been working on age-gating technology in Australia to comply with laws banning social media for kids under age 16, but teens are finding workarounds.

Meta will pay $5.3 billion of its $17 billion settlement only if TikTok and YouTube agree to pay the same, and also set default limits of an hour on their apps, which Meta said it would then adopt. TikTok and YouTube have not responded to Meta or to CNBC's request for comment.

Not everyone is satisfied with this $17 billion settlement, which is just a fraction of the $200 billion that the state AGs were originally pursuing. Florida Attorney General James Uthmeier, who did not participate in the settlement and is pursuing separate litigation against Meta, told CNBC he was frustrated with the five-year commitment Meta made for some features and 10 years for others.

Meta still faces other lawsuits, as do other social media companies, but questions remain about how much the teen changes will affect its bottom line. Meta has said that teens generate less than 1% of its revenue and eMarketer reports that teens spend less time on Instagram and Facebook than they do on TikTok and YouTube. But the added restrictions could drive teen users of Instagram and Facebook to other platforms without restrictions, impacting Meta's appeal to these teens once they grow into adults, who are far more valuable in terms of ad revenue.