Billion-Dollar Fines and the Transformation of Social Media: 5 Questions About the New Lawsuit Against Meta

On August 18, a federal court in Oakland, California, will begin hearings in a case against Meta that could result in significant fines and a restructuring of the company’s operations, according to CNBC. A coalition of 29 state attorneys general accuses the owner of Facebook and Instagram of creating features that contribute to children’s and teenagers’ addiction to social media, as well as illegally collecting data from users under the age of 13.

What penalties could Meta face, and how might the legal proceedings affect changes to how Facebook and Instagram operate? We answer five key questions about the case.

Meta—in violation of federal law—regularly collects data on children under the age of 13 without their parents’ consent and contributes to a mental health crisis among young people by knowingly and intentionally designing features that make children addicted to its platforms, according to a joint lawsuit filed against Meta by the attorneys general of 29 U.S. states three years ago.

The lawsuit, which is set to begin in Oakland, combines the claims of four plaintiffs—from California, Colorado, Kentucky, and New Jersey— reports the Associated Press, noting that hearings on the lawsuits filed by the attorneys general of the remaining 25 states will begin later. At the same time, of the thousands of lawsuits Meta has faced recently regarding child safety on its platforms, perhaps none has had such serious consequences as the one set to be heard this week in California, the agency notes.

The main risk for Meta is that the case could result not only in a hefty fine but also in mandatory changes to how Facebook and Instagram operate, according to CNBC.

Moreover, “California matters more than any other jurisdiction in the U.S.,” says Julia Pauls, executive director of the Institute for Technology, Law, and Policy at the University of California, Los Angeles (UCLA). California—the “home state” (the tech giant’s global headquarters is located in Menlo Park)—that an unfavorable outcome for the social media platform’s owner could result in far harsher penalties, according to CNBC. “This is a jurisdiction that is watched closely around the world,” says Pauls.

The potential financial implications of the case are estimated at hundreds of billions of dollars. Meta previously disclosed in court documents that the states’ claims could result in fines of up to $1.4 trillion—an amount comparable to the company’s market capitalization. Paying this amount would inevitably lead Meta Platforms to bankruptcy and, possibly, to the company being taken over by the government, notes the Associated Press.

At the same time, state officials stated on August 14 that a compensation amount of approximately $200 billion seemed more realistic. This estimate is based on the number of alleged violations and the amounts of fines provided for under state laws.

Meta, for its part, considers these demands to be unfounded.

The trial begins just over a week after the company lost a similar lawsuit in New Mexico. There, a court ordered Meta to pay $567 million into a special fund for failing to warn the public about the dangers its platforms pose to children. This is the largest fine ever imposed on the company for violating child safety regulations, the BBC notes. New Mexico Judge Brian Beidscheid stated at the time that the social media giant poses a “public hazard” similar to air pollution.

Earlier in March, a court in New Mexico also fined Meta $375 million, ruling that the owner of Facebook and Instagram had failed to protect young users from online threats. That same month, a Los Angeles court ordered Meta and Google to pay $6 million to a 20-year-old plaintiff who claimed that Instagram and YouTube had caused her to become addicted at a young age, which harmed her mental health.

The outcome of the case in California could have much broader implications, according to New Mexico Attorney General Raúl Torres. “This is a state with a population of about 2 million people. If the same argument were applied to California, Florida, Texas, or New York, it could potentially become a tremendous force capable of changing the market,” he said.

Financial penalties aren’t the only consequence of the case. If Meta loses, it may be required to change the very way Facebook and Instagram operate. Attorneys general are demanding that the companies remove or modify a number of features they believe contribute to user addiction. These include endless scrolling of the news feed, autoplay videos, ephemeral content, filters for altering one’s appearance, and algorithms optimized for maximum engagement.

Separate claims pertain to children under the age of 13. The plaintiffs are demanding that Meta delete the personal data of such users, as well as the algorithms and models that were trained using that data. The plaintiffs are also seeking a nationwide injunction that would compel Meta to change practices that violate the federal Children’s Online Privacy Protection Act.

In New Mexico, Meta has already been ordered to improve its AI-powered age verification tools and to develop, within two years, a specialized model for identifying users under the age of 13.

It is precisely this approach that could serve as a model for other states, Torres notes. He believes that focusing on platform design allows authorities to frame the issue around the company’s own actions, rather than the content posted by users.

However, some of the plaintiffs’ demands have already run into legal obstacles, according to CNBC. Torres acknowledged that his team was unable to secure all the desired changes in New Mexico through the courts, including an end to endless content scrolling and changes to the recommendation algorithms. The judge noted that some of these changes could conflict with U.S. laws, including the First Amendment to the Constitution, which states that the government may not restrict freedom of speech and the press.

The main difference between this case and many other lawsuits against tech companies is that the attorneys general are targeting not users’ posts, but the company’s product itself—its design and security algorithms, according to CNBC. This is significant in part because of the Communications Decency Act (CDA) of 1996. For decades, this law has limited the liability of internet companies for third-party content. In this case, the states are attempting to structure the case in such a way that liability arises from Meta’s own decisions.

“Public plaintiffs have a tool that private plaintiffs typically don’t have—the ability to use the court system to effectively force companies to change their business models, product design decisions, and everything else,” says Laura Marquez-Garrett, an attorney at the Social Media Victims Law Center, as quoted by CNBC.

That is precisely why the potential damage to Meta could be much greater than the amount of the fine. The court ruling could, in theory, affect the mechanisms that underpin user engagement on Facebook and Instagram.

However, the court has already made it clear that not all of the demands can be met due to the Communications Decency Act and the First Amendment to the Constitution, according to CNBC. Furthermore, if Meta is required to remove certain features, competitors such as TikTok and YouTube could continue to use them, the network notes.

The implications of this development could extend far beyond Facebook and Instagram. Meta derives about 98% of its revenue from online advertising. It is this business that provides the company with the funds for large-scale investments in AI, according to CNBC. By 2026, Meta could spend up to $145 billion on AI. The company is actively expanding its computing power and infrastructure while competing with other major industry players for talent and technology, CNBC concludes.

In addition, Meta—which has already lost two major lawsuits this year related to harm caused to children and teenagers—reported a rare decline in quarterly profits last month, the Associated Press notes — the agency notes that this was partly due to $2.4 billion in legal costs.

This article was AI-translated and verified by a human editor