Meta Platforms Settles Major Lawsuit, Pays $18 Billion

**Tyler Crowe** (0:02)
Meta Platforms dodges a $1.4 trillion bullet. Motley Fool Hidden Gems Investing starts now.
Welcome to Motley Fool Hidden Gems Investing. I'm your host, Tyler Crowe, and today I'm joined by longtime full contributors, Rachel Warren and Lou Whiteman. Guys, a little bit of using a term from a prior host here, I think the news fairy really came in and gave us an extra little dollop for the show today because Meta Platforms has had its fair share of lawsuits out there. There was one back in New Mexico where courts ordered to pay almost a billion dollars in fine, it's outstanding. But looks like a lot of that is changing because it just agreed to a massive settlement with several states on a class action lawsuit, and it looks like the total cost of this is going to be a lot less expensive than expected. Rachel, what were the details of this?

**Rachel Warren** (0:54)
Yeah. To really understand how Meta ended up here, you have to look at what this was about. You had a coalition of state attorneys general that sued Meta, and they accused the company of deliberately designing Facebook and Instagram to be addictive to children.
The lawsuits pointed to a wide range of features, infinite scrolling, algorithmic recommendations, constant push notifications.
We saw recently that New Mexico had won a separate trial against Meta, and a federal judge in California was actually about to drag Zuckerberg himself to the witness stand. In fact, we saw, I believe it was just yesterday, the head of Instagram, Adam Maceri had testified. So now Meta has agreed to a $17 billion settlement to resolve the claims of 47 states. Now, Meta is not going to be just cutting one check. They're actually paying a $12 billion baseline amount, and that's going to be distributed to the states to fund youth mental health addiction recovery programs. But the remaining billions, about $5 billion, actually only kicks in if Meta's top competitors, think TikTok, YouTube, of course, own my alphabet, Snap, also settle with the states and agree to face similar financial penalties. So that's a very interesting element of the settlement. Now, aside from the financial element of it, the settlement binds Meta to an independent auditor with data access to ensure that they are adhering to the terms of this agreement. It also, the settlement enforces sweeping permanent product changes across the US that specifically protect different age brackets. For example, new age verification tools for children under 13, daily two-hour time limits for teenagers under 18, silencing of push notifications. So a lot of changes there for young users. The way a lot of the state's attorneys general are framing it is the largest state consumer protection settlement in history outside of the big tobacco deals of the 1990s. It does very much change the internet for miners moving forward.

**Tyler Crowe** (2:58)
Yeah, I was trying to do the math before the show on where this landed in terms of the biggest settlements in corporate history.
We had big tobacco, obviously. There was the Deepwater Horizon one, it was like $60 billion. It's definitely in the top five though. I think the biggest DOJ settlement was Enron, and that was only $7 billion. So, definitely a massive settlement here, at least on a raw number here. At the same time I say that, though, we had $1 billion in losses to New Mexico, with 48, 47 states in line to do similar class-action lawsuits, as well as state stuff here. It seems like that loss, Lou, kind of influenced this decision to settle here, because I think the losses they were looking at were expected way higher than $16, $17 billion, whatever the final number is going to be here. Right.

**Lou Whiteman** (3:52)
I guess the spin here is the attorneys general would say the change in conduct is so significant that it's worth it. The night mode, the notification steering school, all of that. But on the surface, the monetary side of this is just kind of, it's got to be a letdown. By my account, looking at the, let's say it was 52 parties, 48 states plus four territories. Break it down, that's about 340 million per state. Assuming, as Rachel said, the full 17 comes in. New Mexico got almost a billion by comparison. So yeah, definitely this is a better monetary outcome for Meta than having to go through all of these one by one. And again, the time too.

**Tyler Crowe** (4:37)
Yeah, one of the Bloomberg stories that came out before this settlement was announced this morning was some of Meta's lawyers had said that the losses here could be almost $1.4, $1.5 trillion, basically the entire market cap of the company, based on their kind of projections of, well, if this New Mexico case did almost a billion, this is what the rest could look like. So obviously, 16, 17, 18, whatever the number is, it's definitely a lot less. Now there are still several cases outstanding. This is just the federal ones. So there's some state ones, there's some local ones, there still could be some more coming out of this.