Meta Stares Down Trillion-Dollar Threat as Landmark Social Media Trial Begins

Meta Platforms Inc. is headed to court Tuesday for a high-stakes showdown with a coalition of state attorneys general over claims that the company deliberately designed Facebook and Instagram to encourage compulsive use among young users.

In a case that carries enormous risk for one of the world’s most valuable tech companies, the top legal officers of 29 states are seeking not only massive financial penalties, but also court orders that could force Meta to change how it operates its platforms.

The jury trial in federal court in Oakland, California, comes as social media companies are facing a global backlash over concerns that they profit at the expense of young users, for whom a growing body of research shows that heavy use of the algorithm-driven platforms can be dangerously unhealthy.

While authorities in Australia and Europe have enacted or proposed outright bans for youths in the last year, legislative crackdowns in the US have had limited success, turning the courts into a pivotal battleground.

The Meta trial is especially momentous because it’s focused on alleged violations of state consumer protection and federal privacy laws — which carry fines of as much as $20,000 per violation that can add up quickly when multiplied by millions of young Instagram and Facebook users.

By Meta’s own calculations, if it loses the trial it could face penalties of as much as $1.4 trillion, an amount close to its market capitalization and unheard of in the annals of legal history.

“The stakes could not be higher in this case,” said Eric Goldman, a professor at Santa Clara University Law School who specializes in internet law.

While the attorneys general have not publicly disclosed exactly how much they’re seeking in penalties, Megan O’Neill, a lawyer for California, put the figure closer to $193 billion during a court hearing last week, while suggesting that Meta was pointing to the highest theoretical amount for “shock value.”

Even the lower amount would be among the largest ever litigation payouts, comparable to the $206 billion settlement that state attorneys general struck with tobacco companies over cigarette addiction in 1998.

The lawyers behind the cases have gained traction in court by arguing that the products themselves — through their design and functionality — have created harms, rather than taking at aim at content, for which platforms are broadly protected from liability.

This strategy, several years in the making, succeeded in its first test when a Los Angeles jury in March awarded $6 million to a 20-year-old woman who said her nonstop use for more than a decade of sites including Meta’s Instagram and Google’s YouTube caused her to suffer anxiety, depression and body dysmorphia.

‘Outlandish Payout’

Meta has denied the states’ allegations, and accused the attorneys general of seeking unreasonable design changes and an “outlandish payout.”

Read More: Meta Calls States’ $1.4 Trillion Addiction Damages Bid Unmoored

At the trial, the jury will be serving only in an advisory capacity. US District Judge Yvonne Gonzalez Rogers ultimately will decide whether Meta is liable for wrongdoing, and if so, what penalty and remedies to impose.

The attorneys general spearheading the case, from California, Colorado, Kentucky and New Jersey, allege under their separate state laws that Meta knowingly designed features that encouraged compulsive and prolonged use of its platforms by young people, while simultaneously misleading consumers about safety features on its platforms.

The broader bipartisan group of 29 states accuse the company of collecting data from users under 13 years old in violation of the federal Children’s Online Privacy Protection Act.

Younger Users

In addition to seeking an order requiring Meta to restrict younger users on its platforms, the states seek to force the company to remove allegedly addictive features like infinite scroll and its content recommendation systems.

“We are ready to hold Meta accountable for its role in fueling the mental health crisis of American children and look forward to trial,” California Attorney General Rob Bonta, a Democrat, said in a statement.

Meta said in a statement that while the AGs tout the case as a landmark, “their limited claims are unsubstantiated and their financial demands are vastly disproportionate.”

“The AGs offer no proof anyone in their states was misled, claim benign features like having an additional Instagram account somehow harmed their residents, and attempt to penalize Meta for industry-wide challenges like age verification,” according to the company.

BI Litigation Watch: Social-Media Addiction Suits

Key Dates in the Litigation

After opening statements Tuesday, the trial is expected to take about five weeks. Meta co-founder and Chief Executive Officer Mark Zuckerberg and Instagram head Adam Mosseri are lined up to testify, as are dozens of other witnesses including current and former Meta employees as well as experts in the fields of technology and psychology.

The trial comes on the heels of a nearly $1 billion hit for Meta in a case brought by New Mexico’s attorney general.

A state court judge in Santa Fe likened Meta to a polluting factory and ordered the company to make platform changes, including time limits for usage and push notifications for young users. Meta was ordered to pay roughly $375 million in civil fines and $567 million to ameliorate social media harms to youths in the state.

‘Public Nuisance’

The ruling was a significant test of the legal theory behind the attorney general cases: social media companies are a “public nuisance” that harm the general public. The same theory was used in earlier public-health litigation against Big Tobacco and opioid manufacturers.

The case in Oakland will test a similar legal argument, this time in federal court and on behalf of multiple states.

Meta was unsuccessful last week in its emergency request to an appeals court to postpone the trial. The company argued that the trial should wait for the 9th US Circuit Court of Appeals to resolve whether the claims by the attorneys general are foreclosed by Section 230 of the federal Communications Decency Act, which provides a broad legal shield for lawsuits against internet platforms.

About 14 other states are separately pursuing social media harm cases against Meta in their own state courts. A trial in Tennessee’s case is close to wrapping up in Nashville.

Minda Smiley, a senior analyst at Emarketer focused on social media, said the prospect of a penalty in excess of a trillion dollars “is more symbolic at this point.”

“It’s representative of the gravity of the claims Meta faces,” she said. “It’s becoming clear that these lawsuits could have a material impact on not only Meta’s business, but how its platforms fundamentally operate.”

The case is People of the State of California v. Meta Platforms Inc., 23-cv-05448, US District Court, Northern District of California (Oakland).

Photo: Photographer: David Paul Morris/Bloomberg