It\u2019s no secret Meta is one of the wealthiest companies in the world. Last year, it brought in nearly $201 billion in revenue, and at the end of this June, it was sitting on more than $90 billion in cash and marketable securities.\u00a0<\/p>\n
\n
Now, a federal trial underway in Oakland, Calif., is testing what it would actually take to financially hurt a company that big. California, Colorado, Kentucky, and New Jersey have accused Meta of misleading the public about the risks its platforms pose to young users and of designing features on Instagram and Facebook that keep children and teenagers hooked. The four states are going first in a case brought by a coalition of 29 state attorneys general that sued the company in 2023.<\/p>\n
Meta is already fighting child-safety lawsuits across the country, but this case carries an added threat because of who is bringing it. State attorneys general can bring claims that private plaintiffs cannot, including claims under the Children\u2019s Online Privacy Protection Act, or COPPA. They can also seek remedies to address alleged harms affecting potentially millions of people.<\/p>\n
\u201cThe stakes might be higher in this case because the damages awards are going to measure potentially many millions of people\u2019s harms,\u201d Eric Goldman, co-director of Santa Clara University School of Law\u2019s High Tech Law Institute, told Fortune<\/em>. \u201cAnd there might be extra remedies because of the specific claims that the attorney general can bring.\u201d<\/p>\nThat helps explain the almost incomprehensible number hanging over the trial: $1.4 trillion.\u00a0<\/p>\n
That\u2019s how high Meta says potential penalties could climb under the states\u2019 theory of the case, putting the theoretical maximum in the neighborhood of the value of the company itself.\u00a0<\/p>\n
\u201cIt\u2019s a number that boggles the mind, frankly,\u201d Goldman said.<\/p>\n
At its most extreme, Goldman said, the potential damages Meta has described could effectively transfer the value held by Meta\u2019s stockholders to the public.<\/p>\n
\u201cEssentially, it\u2019s asking Meta to turn in the keys and walk away,\u201d he said.<\/p>\n
Actually getting anywhere near that $1.4 trillion is another matter. The eight-person jury hearing the case is advisory, leaving U.S. District Judge Yvonne Gonzalez Rogers with the ultimate decision on liability and remedies.<\/p>\n
James Grimmelmann, a professor of digital and information law at Cornell University, told Fortune<\/em> he does not expect the bellwether trial to end with a penalty that bankrupts Meta.<\/p>\n\u201cIt\u2019s always hard to guess with damage awards,\u201d Grimmelmann said. \u201cThe jury is purely advisory, so whatever it concludes won\u2019t be binding on the court, and even if it comes in with an extremely high number, the judge could revise it and so could other courts on appeal.\u201d<\/p>\n
New Mexico may offer a glimpse of what a major state-level financial hit could look like. A jury there found Meta liable for 75,000 violations of the state\u2019s consumer protection law earlier this year, resulting in $375 million in civil penalties. A judge later found Meta\u2019s platforms constituted a public nuisance and ordered the company to pay another $567 million toward addressing youth mental-health harms, bringing its total financial liability in the case to $942 million. Meta is appealing.<\/p>\n
But the Oakland case is about more than how many zeroes Meta could be ordered to put on a check.<\/p>\n
What Meta says the states get wrong<\/strong><\/h2>\n\u201cThe State AGs may call this a landmark case, but their limited claims are unsubstantiated and their financial demands are vastly disproportionate,\u201d Meta spokesperson Stephanie Otway told Fortune <\/em>in an emailed statement.<\/p>\nMeta argues the states have not shown anyone in their states was misled or harmed by the features at issue, and that the AGs are attempting to penalize the company for what it calls \u201cindustry-wide challenges like age verification,\u201d Otway said.<\/p>\n
\u201cRather than sticking to the facts or the law, the states have instead decided to chase an outlandish payout,\u201d Otway said. \u201cWe stand by our record of creating strong protections for teens, and look forward to making our case in court.\u201d<\/p>\n
Less than 1% of Meta\u2019s revenue comes from teens on Instagram, but Goldman emphasized the share of Meta\u2019s business directly tied to those users doesn\u2019t answer the central question in the case.<\/p>\n
\u201cThe relevant question is how much harm is Meta causing in society,\u201d Goldman said.<\/p>\n
Goldman said millions of young people still use Meta\u2019s services. If the states convince the court those users were harmed, the potential liability is not necessarily limited by how much revenue Meta directly makes from teens on Instagram.<\/p>\n
And money is only one way Meta could lose.<\/p>\n
The fight over how social media works<\/strong><\/h2>\nThe attorneys general are challenging choices Meta made about how its platforms are designed and how content is presented to users. That distinction is central to how the case got this far.<\/p>\n
Section 230 generally protects internet companies from being held liable for content posted by their users. The states argue they aren\u2019t suing Meta over what users post; they are challenging Meta\u2019s own decisions about how that content is presented to users.<\/p>\n
Goldman doesn\u2019t think those two things can be separated so cleanly.<\/p>\n
\u201cTo me, that distinction is illusory. That makes no sense,\u201d Goldman said. \u201cYou can\u2019t separate out the editorial function and say we\u2019re going to extinguish the content and the way it\u2019s presented. Those are the same thing in my mind, but Judge Rogers disagreed, and that\u2019s why this case has gotten to trial.\u201d<\/p>\n
Goldman also raised a First Amendment concern. He compared Meta\u2019s decisions about how it presents users\u2019 posts to the editorial choices a publication makes about which stories receive more prominence, like how large a headline appears or whether a story includes photographs. In his view, those decisions are themselves expressive choices protected by the First Amendment. Those arguments have not stopped the case from reaching trial.<\/p>\n
The result of that fight could matter well beyond whether Meta pays hundreds of millions, billions, or anything approaching $1.4 trillion.<\/p>\n
TikTok, YouTube, and Snapchat face similar litigation over alleged harms to young users. Goldman said a victory for the states in Oakland could provide a playbook for challenging how other social media platforms are designed.<\/p>\n
And it may not stop at social media. Goldman pointed to lawsuits already testing similar theories against generative AI, video games, and social gaming.<\/p>\n
That makes the potentially enormous penalty only one part of what is being decided in Oakland. Meta can challenge a damages award on appeal. A legal theory that survives the case can be picked up and used again.<\/p>\n
\u201cThat\u2019s why I say that the internet is on trial in Oakland right now, because it\u2019s not just Meta and it\u2019s not just social media,\u201d Goldman said.<\/p>\n<\/div>\n
#Meta #faces #trillion #penalty #landmark #childsafety #trial<\/p>\n","protected":false},"excerpt":{"rendered":"
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