Not many people would count paying $18bn they didn’t expect to when they woke up that morning as a victory. Yet for Meta, the owners of Facebook and Instagram, the agreement with 52 US attorneys general to settle claims that it designed its products to be addictive to children, and misled people about their safety, could be described as a win of sorts.
Meta denies wrongdoing, and the amount it plans to pay will be spread over a decade. Some of it is contingent on other big tech firms not named in its case coughing up too. The cash is chump change for Meta, which made around $60bn in profit last year. More damaging to the tech giant in the long run could be the agreement to unwind some of the mechanics it has spent two decades perfecting to keep us on its platforms.
Under-18s in the US will face a default two-hour daily limit on Facebook and Instagram, with access blocked overnight – unless a parent changes the setting. Teachers will be glad to hear notifications will be muted during school hours, while teenagers will be nagged as much by the platform itself as their parents about exactly how long they have spent staring at their screens.
All of these are significant changes that materially change how the company’s products work – and all of them should be welcomed. But in lots of ways, Meta has got off lightly with this agreement, both in what it’s been asked to do and the fine it must pay.
What the decision shows, just months after Meta chose to fight its corner in court, and lost significantly, is how the economics of fighting social media litigation have changed. This settlement signifies an important and deliberate shift in strategy. In August, Meta went to court in New Mexico – a decision that cost it dearly. The judge there ordered the firm to pay $942m and overhaul some protections for children – a decision it is appealing. The fact that Meta lost that case, and was found to have done wrong, was far more damaging than this week’s settlement without liability, even if the amounts involved were smaller. Still, thousands more cases involving social media addiction claims are still wending their way through US courts.
And chastened by a couple of losses, it looks – at least in this instance – like Meta has taken the approach that a pyrrhic victory is better than the risk of another real loss. Settlements without admission of fault avoid judgments and a legal situation that could quickly spiral out of control for Meta’s product offering.
While Meta has had to make significant changes to its platforms as a result of this week’s settlement, it still ultimately has control over what changes are made, and has sought to limit them to the bare minimum. Settling, however expensive, is a way of protecting its core business proposition.
Meta now faces a Hobson’s choice when it comes to litigation. It can gamble on a jury and risk vast damages, damaging internal disclosures and a judge deciding which parts of Instagram or Facebook must change. Or it can pay an eye-watering but manageable sum to settle, negotiate the product changes on its own terms and staunch the bleeding.
That $18bn is certainly more than most companies could pay, but it pales in comparison with the $1.5tn Meta’s own PR team warned the case could cost it had it gone through the courts – and the more realistic $200bn the prosecuting lawyers sought to squeeze from the firm. And even more than that, Meta has managed to make some of the bill somebody else’s problem. About a third of the settlement it has agreed to pay is conditional on TikTok and YouTube introducing similar restrictions and each making matching payments. Meta is publicly calling on both companies to sign up.
As this is a negotiated settlement – and one in which no one wins, but Meta certainly doesn’t lose – not everyone has been won over. While attorneys general from 48 US states agreed to Meta’s proposition, Florida’s representative has publicly rejected the deal and intends to continue pursuing Meta. James Uthmeier dismissed the settlement as “peanuts” and said “We’ll see them at trial.”
Nor is this necessarily just an American story. The settlement formally applies only to the participating US states and territories. A Meta spokesperson told me it already offers strong protections for teenagers elsewhere. It will watch how the new measures work before deciding what comes next internationally.
But running substantially different versions of Facebook and Instagram around the world is hardly attractive. And Meta has now demonstrated putting these restrictions in place is possible. Given the drive towards child safety online in the UK and Australia, it seems likely that politicians will soon ask why American teenagers get them and children in their own countries don’t. The UK’s own Online Safety Act is a useful stick for the government to wield in this instance, adding extra leverage to bring those changes here, too.
And it’s that which may prove the settlement’s biggest consequence. Meta has paid billions to manage to duck liability in one court case. But in doing so, it may have opened up the possibility of change in a raft of other countries.
