Opening statements began on Tuesday in the case against Meta, jointly led by California Attorney General Rob Bonta. The company is accused of contributing to the development of addiction to its platforms among teenagers and children. The jury was formed last week in a federal court in Oakland.
The trial is part of a consolidated case filed in 2023 by a coalition of attorneys general from 29 states. The interests of the states in court are represented by lawyers from California, Colorado, New Jersey, and Kentucky. They demand that Meta be held accountable for alleged violations of federal laws and state laws, including the Children’s Online Privacy Protection Act (COPPA) and consumer protection laws.
Industry experts call this process a “Big Tobacco” moment for social networks, comparing it to lawsuits against tobacco companies in the 1990s. At that time, cigarette manufacturers were forced to pay billions of dollars for misleading the public about the safety and potential harm of their products, after which their influence significantly decreased.
Julia Paules, executive director of the Institute for Technology, Law, and Policy at the University of California, Los Angeles (UCLA), noted that “California has more significance than any other jurisdiction in the U.S.”, as it is here that the company is subject to the broadest legal influence, and the decisions of this state “are watched worldwide.”
Preliminary verdict in New Mexico
Earlier this month, Meta lost a case in New Mexico. As a result, the company was ordered to make changes to its services and pay nearly 1 billion dollars. The judge ordered Meta to allocate 567 million dollars to a remediation fund as part of the second phase of the case related to allegations of child sexual exploitation.
In March, during the first phase of the trial, jurors in New Mexico ruled that Meta must pay 375 million dollars for violating the state’s unfair practices law. Meta stated that it disagrees with the decision and plans to appeal.
New Mexico Attorney General Raúl Torres, after the court victory, told CNBC that the consequences for the company, which gets 98% of its revenue from online advertising, could be “astronomical.” He called the New Mexico decision “quite substantial,” but noted that it “pales in comparison to what could be,” if the same arguments were applied to California, Florida, Texas, or New York.
Meta CEO Mark Zuckerberg relies on funds from the company’s powerful advertising business to finance large investments in artificial intelligence, which this year could reach 145 billion dollars.
What changes Meta may be required to make
Although the details of the cases differ, they all concern the allegedly harmful design of platforms such as Facebook and Instagram. Torres noted that the plaintiffs’ attention to the design features of the applications and alleged false statements about safety “really provides a plan for other states to hold them accountable.” This approach allows states to bypass Section 230 of the Communications Decency Act, which generally protects technology companies from liability for content created by third parties on their platforms.
In New Mexico, Meta was ordered to improve using AI “age verification models and tools,” as well as attempt within two years to “develop a special age prediction model for under 13 years old.” Other measures include simplifying reports of platform use by minors and collaborating with schools or child safety organizations to create a portal through which schools can report suspicious accounts.
California Attorney General Rob Bonta stated last Monday that one of his most important tasks is “protecting our children from harm.” “Meta has developed a dangerous product for young users, knew it was dangerous, and then lied to children, families, and society about how dangerous it was,” he said, adding that the authorities are ready to hold Meta accountable for its role in deepening the mental health crisis among American children.
Meta stated in its statement that “the limited claims of the coalition of attorneys general are unfounded, and their financial demands are grossly disproportionate.” The company stated that the prosecutors did not provide evidence that any residents of their states were misled, and also tried to punish Meta for problems common to the entire industry, including age verification.
Meta’s lawyers previously stated that the consolidated trial on the states’ lawsuits could result in damages of up to 1.4 trillion dollars. At the same time, the states’ lawyers informed federal judge Yvonne Gonzalez Rogers last week that a more likely amount is about 200 billion dollars.
However, financial payments may not be the only and not even the most serious problem for Meta. In the event of a loss in California, the company may be forced to significantly change the design of its platforms and the principles of operation of the services. Laura Marques-Garrett, a lawyer at the Center for the Protection of Victims of Social Networks, noted that state plaintiffs have the opportunity through the court to “force these companies to change their business model, their design decisions, all of this.”
The states’ attorneys general stated in the court filing that they demand “a permanent nationwide, not state-by-state, court injunction to stop Meta’s illegal actions and practices” in cases related to COPPA. If the court finds a violation of federal law, the states want to force the company to delete all personal data of children under 13 years old, as well as “algorithms and models” trained using this data.
Regarding possible violations of state consumer protection laws, lawyers demand that Meta remove “certain design elements that create addiction,” including infinite scrolling, automatic content playback, temporary content, beauty filters, and “algorithms optimized for engagement.”
At the same time, Torres admitted that his team did not achieve all the desired changes, including the elimination of infinite scrolling and changes to recommendation algorithms. The judge noted that some of these requirements may conflict with Section 230 and the guarantees of the First Amendment, and their implementation could put Meta at a disadvantage, as competitors like TikTok and YouTube would retain similar features.
Torres stated that he plans to turn to the legislative process with a bill on social networks and updates to consumer protection legislation, which should cover a wide range of practices common in the digital economy.
Torres believes that Wall Street underestimates the potential significance of Meta‘s loss in California, considering the New Mexico decision “in isolation.” Meta’s shares have fallen by 11% this year, but most of the analysts’ concerns are related to the company’s huge capital expenditures on AI infrastructure, rather than fears of a potential deterioration in the advertising business.
“Analysts are not evaluating this correctly now,” said Torres. “The California decision alone”
