Aug 26 (Reuters) – Meta Platforms agreed to pay a maximum $16.68 billion and make major changes to Facebook and Instagram to resolve claims by states across the U.S. that the company designed those platforms to addict children, misled consumers about their safety, and improperly collected children’s personal data, court papers show.
Meta shares were down 0.4% in early trading.
COMMENTS:
CAROLINA ROSSINI, A PROFESSOR AT THE UNIVERSITY OF MASSACHUSETTS, AMHERST “The settlement amount is a beginning, not a resolution. Money compensates for past harm; it does nothing about the product that keeps causing it. Unless the settlement compels genuine redesign (e.g., removing the engagement mechanics built to exploit adolescent neurodevelopment, not cosmetic safety toggles) the harm continues the day the check clears. And redesign without accountability is a press release: we need independent audits, researcher access to platform data, and enforceable benchmarks with penalties for non-compliance. Meta has promised to change before. The question is who verifies it this time, and what happens when they don’t.”
DENNIS DICK, FOUNDER AND MARKET STRUCTURE ANALYST AT TRIPLE D TRADING INC”This was a big uncertainty weighing on shares of Meta. So they get the relief pop here. It’s an uncertainty for all social media companies. Does this give you a little bit of relief? I don’t know, because again, this isn’t like they were found not guilty. They settled. So I’m not sure what this means for other social media companies. I’m going to put this in the uncertain camp.”
CHRIS BEAUCHAMP, CHIEF MARKET ANALYST AT IG GROUP, LONDON”I think the market is viewing the settlement positively, as reflected in the pre-market share price rise. Investors seem relieved that the penalty was not as severe as it could have been, given the scale of the case and the potential for a much larger fine.”
“The settlement is more significant for what it says about the broader regulatory and reputational environment. There is growing scrutiny of social media’s impact, particularly among parents and younger users, and the required measures signal that regulators are taking a tougher stance.”
ROBERT PAVLIK, SENIOR PORTFOLIO MANAGER, DAKOTA WEALTH IN FAIRFIELD
“This news of the settlement removes a major overhang. It doesn’t remove all the overhangs, but it removes the federal one. There are still a number of lawsuits and cases that are going to be against them, and they have to either settle them or get them resolved somehow. But I think the market is looking at it as a first hurdle that the company has at least cleared for now.”
“I think it was a surprise that it was settled… I didn’t think anybody really sort of expected it to happen, especially today.”
ART HOGAN, CHIEF MARKET STRATEGIST, B RILEY WEALTH, NEW YORK”This has the potential to be a groundbreaking social media destroyer, if in fact after the long legal process, it’s proven that Meta did something nefarious by designing their product to be addictive, especially to young kids. So I think it’s very early in the process and I don’t even know what the oddsmakers are making of that potential. But I would say when you take a larger look at what the potential for this could be — the companies involved would have to make massive changes to their algorithms and the way they do business. And it brings up the safety of social media at a time where a lot of people were thinking about the safety of artificial intelligence. So it’s something that sort of came from around the corner versus everyone being concerned about artificial intelligence and its safety.”
JIM SPETA, A PROFESSOR AT NORTHWESTERN PRITZKER SCHOOL OF LAW
“This settlement reflects two overlapping developments. First, although Meta had legal arguments to resist liability, the number of suits pending and the early losses in Los Angeles and New Mexico increased the risks of continuing to litigate. Second, public opinion has turned and has come to favor changes to the way social media companies do business, especially with respect to children. In that environment, 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 that were beginning to consider other legal limits.”
“I think these restrictions will change the experience on Instagram and Facebook, and they are designed to reduce engagement. It remains yet to be seen what the effects will be – both on how people, especially children, use these platforms and how the company’s revenues change if advertisers also are affected by decreased engagement. Yet, there is no doubt that this is a big deal.”
DARYL LIM, A PROFESSOR AT PENN STATE DICKINSON LAW”The first thing I would note is that the word ‘maximum’ matters. A maximum of $16.68 billion is not the same thing as Meta writing a $16.68 billion check today. But even with that qualification, the potential size of the settlement is striking, particularly because Meta agreed to settle after the trial had already begun.”
“Legally, the settlement does not create a precedent in the way a court decision would. But it will matter in practice. Other states and plaintiffs now have another indication that these cases can survive substantial legal challenges, reach trial, and create very significant financial exposure for Meta.”
“What I would be watching most closely are the precise changes Meta has agreed to make. The states were seeking not only money but changes to how Facebook and Instagram operate.”
(Reporting by Jaspreet Singh, Ananad Gopal, Ragini Mathur, Sudeshna Ghoshal, Utkarsh Hathi in Bengaluru; Editing by Sweta Singh and Saumyadeb Chakrabarty)
