By Diana Novak Jones and Jonathan Stempel
OAKLAND, Calif., Aug 26 (Reuters) - Meta Platforms will pay up to $18 billion and strictly limit how teenagers use Facebook and Instagram under a sweeping agreement with nearly all U.S. states to resolve claims it designed those social media platforms to addict children.
The settlements announced on Wednesday end a federal trial over allegations Meta's products harmed children and the company misled the public about their safety. Four of the states — California,
Colorado, Kentucky and New Jersey — were expected to seek close to $200 billion in civil penalties.
While Meta will not undergo a fundamental overhaul, the accords represent a sweeping effort to define how it serves young users.
It could provide a template for resolving thousands of other lawsuits against social media companies. Governments around the world are trying to curb children's access to harmful online content, including a ban in Australia on social media for children under 16.
“The focus of this case was to protect our kids," Colorado Attorney General Phil Weiser said in a statement. "The relief we are getting in this settlement is very meaningful and well beyond what any court has ordered or is likely to order."
Meta agreed over the next decade to restrict teenagers' use of Facebook and Instagram to two hours a day and block all usage from midnight to 6 a.m., absent parental consent.
These limits could be tightened if the social media platforms Snapchat, TikTok and YouTube adopt similar terms. Meta will also disable most push notifications to teenage users during school hours of 8 a.m. to 3 p.m. and enhance measures to prevent children from accessing age-restricted content.
The settlement does not require Meta to abandon personalized recommendations or targeted advertising.
Meta denied wrongdoing in agreeing to settle. The total payout represents about three to four months of profit for the Menlo Park, California-based company.
"Ensuring teens have a safe and productive experience on our platforms is an absolute imperative for Meta," the company said in a blog post. "We want to get this right for parents and teens."
Shares of Meta were up 1.1% in afternoon trading.
CHANGING THE ONLINE EXPERIENCE
The settlements include maximum payments of about $17.7 billion to 48 U.S. states, Washington, D.C., Puerto Rico, American Samoa and the Northern Mariana Islands.
California could receive a $2.2 billion payout, while New York and Texas could each receive more than $1 billion.
Some states will deposit funds they receive in general accounts while others will earmark portions to address children's mental health.
Meta guaranteed payments of about $12.7 billion, with another $5 billion contingent on whether Snap Inc's Snapchat, ByteDance's TikTok and Alphabet's YouTube impose similar protections for children. Those companies were not immediately available for comment.
"This is a big deal," said James Speta, a Northwestern University law professor who specializes in telecommunications and internet policy.
"Meta and other companies were facing pressure to change business practices whether or not they lost the lawsuits, from the public and from Congress and state legislatures," he continued. "These restrictions will change the experience on Instagram and Facebook, and they are designed to reduce engagement."
Wednesday's settlements also call for Meta to pay $459 million to resolve states' privacy claims related to the Cambridge Analytica scandal, where a British consulting firm collected personal data of millions of Facebook users without authorization.
The main settlement, which does not include Texas, requires approval by U.S. District Judge Yvonne Gonzalez Rogers, who oversaw the trial that began on August 18.
Instagram head Adam Mosseri had begun testifying, and Meta Chief Executive Mark Zuckerberg had been expected to testify.
At a Wednesday hearing, Gonzalez Rogers called the settlement "a good step forward" and said she expected to grant approval.
"I don't want to suggest that there's anything with this agreement that I am particularly concerned with," the judge said. "I am quite happy to not have to finish up this trial."
MENTAL HEALTH CRISIS
Social media companies still face thousands of lawsuits in federal and state courts by individuals, school districts, municipalities and other government entities claiming they knowingly sought to addict children, and caused a mental health crisis including harms such as anxiety, depression and suicide. Gonzalez Rogers oversees many of these cases.
The Meta trial included claims by California, Colorado, Kentucky and New Jersey that the company's conduct violated state consumer protection laws.
It also included claims by 29 states that Meta violated the federal Children's Online Privacy Protection Act by knowingly collecting personal data from children without parental consent and using the data to train generative AI.
Meta had long argued that it could not have misled consumers because "social media addiction" was not a recognized psychiatric condition.
Before the trial began, Meta said California, Colorado, Kentucky and New Jersey were seeking up to $1.4 trillion in penalties.
Earlier this year, Meta lost both phases of a landmark lawsuit where New Mexico accused it of misleading consumers about its platforms' safety. A jury ordered Meta in March to pay $375 million, and a judge this month ordered Meta to pay an additional $567 million and implement youth-safety measures for creating a public nuisance.
Also in March, a Los Angeles jury found Meta and Alphabet's Google negligent in designing their platforms, and ordered them to pay $6 million to a 20-year-old woman who said she became addicted to Instagram and YouTube as a child.
Meta and Google have said they will appeal those verdicts.
New Mexico was not part of Wednesday's settlements, but the state's Attorney General Raul Torrez said the resolution "represents real progress and adds momentum to finish the job of protecting kids online."
Florida also did not settle, and plans to keep litigating.
"The payouts to the states are peanuts compared to the profound harms Meta’s profit-driven addictive features have inflicted on our children," Florida Attorney General James Uthmeier said in a statement. "We’ll see them at trial."
(Reporting by Diana Novak Jones in Chicago and Jonathan Stempel in New York; Additional reporting by Greg Bensinger in Oakland, California and Nishara Karuvalli Pathikkal and Jaspreet Singh in Bengaluru, Editing by Alexia Garamfalvi, Jamie Freed and Mark Porter)
