By Diana Novak Jones and Jonathan Stempel
Aug 26 (Reuters) - Meta Platforms agreed to make major changes to Facebook and Instagram and pay up to $18 billion to resolve claims by most U.S. states that it designed those platforms to addict children and misled consumers about their safety.
The settlements announced on Wednesday end a federal trial that had been one of the highest-profile tests of allegations that social media companies harm children.
While Meta will not undergo a fundamental overhaul,
the accords represent a sweeping effort to define how it serves young users.
“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 for 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 other social media companies adopt similar terms. Meta will also enhance measures to prevent children from accessing age-restricted content.
The settlement does not require Meta, which denied wrongdoing in agreeing to settle, to abandon personalized recommendations or targeted advertising. 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."
CHANGING THE ONLINE EXPERIENCE
The settlements include more than $17.6 billion of payments to 48 U.S. states, Washington, D.C., Puerto Rico, American Samoa and the Northern Mariana Islands.
Meta will also pay $459 million to resolve states' privacy claims related to the Cambridge Analytica scandal, where the British consulting firm collected personal data of millions of Facebook users.
California would receive the highest payout, $2.2 billion, and New York and Texas would each receive more than $1 billion.
Some of the payout is contingent on whether Alphabet's YouTube and ByteDance's TikTok impose similar protections for children. Neither of those companies was 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."
The settlement 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.
Shares of Meta rose 1.4% in morning trading.
MENTAL HEALTH CRISIS
Social media companies face a broad wave of litigation by states, local governments, school districts and individuals accusing them of fueling a youth mental health crisis, causing such harms as anxiety, depression and suicide.
Meta, YouTube, TikTok, and Snap Inc's Snapchat still face thousands of lawsuits in federal and state courts claiming they knowingly tried to addict children to their platforms.
The Meta trial included claims by California, Colorado, Kentucky and New Jersey that the company 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. The states suggested the figure was closer to $200 billion.
THOUSANDS OF LAWSUITS STILL PENDING
Gonzalez Rogers still oversees thousands of lawsuits by individuals, school districts, and state and local governments accusing social media companies of harming children.
Meta itself still faces thousands of lawsuits by individuals, school districts and municipalities. The next trials are slated for October in Los Angeles.
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 in March ordered Meta to pay $375 million, and a judge on August 6 ordered it to pay an additional $567 million and implement youth-safety measures, finding that Meta created 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 and suffered from anxiety and depression.
Meta and Google have said they will appeal those verdicts.
New Mexico and Florida were not part of Wednesday's settlements.
"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 Nishara Karuvalli Pathikkal and Jaspreeth Singh in Bengaluru, Editing by Alexia Garamfalvi, Jamie Freed and Mark Porter)
