Meta’s US$18bn settlement could be just the start

Last week’s settlement without liability was pragmatic, but it does not change the inevitability of further lawsuits around the world

• By Chris Stokel-Walker / The Guardian

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Not many people would count paying US$18 billion they did not expect to when they woke up that morning as a victory. Yet for Meta Platforms Inc, 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 would be spread over a decade. Some of it is contingent on other big tech firms not named in the case coughing up too. The cash is chump change for Meta, which made about US$60 billion 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 users on its platforms.

Children younger than 18 in the US would 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 that notifications would be muted during school hours, while teenagers would be nagged as much by the platform itself as their parents about exactly how long they have spent staring at their screens.

Illustration: Yusha

All of these are significant changes that materially change how the company’s products work — and all of them should be welcomed. However, in lots of ways, Meta has got off lightly with this agreement, both in what it has 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.

Meta last month went to court in New Mexico — a decision that cost it dearly. The judge there ordered the firm to pay US$942 million and overhaul some protections for children — a decision it is appealing.

That Meta lost that case, and was found to have done wrong, was far more damaging than last 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.

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 judgements 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 last 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 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 US$18 billion is certainly more than most companies could pay, but it pales in comparison with the US$1.5 trillion Meta’s own public relations team warned the case could cost it had it gone through the courts — and the more realistic US$200 billion the prosecuting lawyers sought to squeeze from the firm.

Even more than that, Meta has managed to make some of the bill somebody else’s problem. About one-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 does not lose — not everyone has been won over. While attorneys general from 48 US states agreed to Meta’s proposition, Florida Attorney General James Uthmeier rejected the deal and intends to continue pursuing Meta. He dismissed the settlement as “peanuts” and said: “We’ll see them at trial.”

Nor is this necessarily just a US story. The settlement formally applies only to the participating US states and territories. A Meta spokesperson said it already offers strong protections for teenagers elsewhere. It would watch how the new measures work before deciding what comes next internationally.

Running substantially different versions of Facebook and Instagram around the world is hardly attractive, and Meta has now demonstrated that putting these restrictions in place is possible. Given the drive toward child safety online in the UK and Australia, it seems likely that politicians would soon ask why American teenagers get them and children in their own countries do not. The UK’s Online Safety Act is a useful stick for the government to wield in this instance, adding extra leverage to bring those changes here, too.

It is that which might prove the settlement’s biggest consequence. Meta has paid billions to manage to duck liability in one court case. However, in doing so, it might have opened up the possibility of change in a raft of other countries.

Chris Stokel-Walker is the author of TikTok Boom: The Inside Story of the World’s Favourite App.