Meta’s Addiction Case Settlement & Tracking Tariffs

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**Ann Berry** (0:31)
Abercrombie & Fitch, Bath & Body Works, the more staples of our youth are chugging along. We survey the latest from earnings. Tariff refunds, billions flowing back to companies. But where's the cash showing up? We follow the money. And Meta, a landmark legal battle over kids and social media ends in a multi-billion dollar settlement. We have the numbers and the major changes that will affect how teens use Meta's apps. For Wednesday, August 26th, it's Brew Markets Daily, and I'm Ann Berry.
More market details to come. But first, Meta settling a landmark legal battle over children and social media that kicked off in a California federal courthouse last week. Attorneys General from 29 states accused the company of deliberately designing its social media apps to keep young users hooked, while at the same time misleading parents and the public about those risks. That's in a unified case brought against Meta in 2023
Well, four states, that's California, Colorado, Kentucky and New Jersey, just pushed the case ahead and landed a proposed settlement that would require Meta to pay up to $16.7 billion to the suing states over a 10-year period. Texas, not part of the group settlement, agreed to a separate billion-dollar payment.
Meta also agreed to striking changes to the way its apps operate when it comes to time spent on them. That includes a default limit of two hours for users under the age of 18, a block on use between midnight and 6 AM, which only parents can lift, and also school time notification blocks.
Then there are changes to content. Cosmetic surgery filters, I almost can't believe I'm saying this, will be banned for minors, as will the displaying of the number of likes or reactions to posts that have been made by minors, so trying to get rid of the pressure of looking at engagement stats. Well, Meta strongly denies the allegations that have been brought by the states. But a California Attorney General, Rob Bonta, said in a statement that, Meta has agreed to make massive transformations that will reduce risk of harm from its platforms and will do it within months.
Well, Meta's chief legal officer called the framework groundbreaking in terms of empowering parents to manage their kids' use of Meta apps. But he was noticeably quick to point the finger at competitors pressuring them to follow suit, saying, quote, success depends on all other social media platforms following Meta's lead and called out both the privately owned TikTok and YouTube, owned of course by Tech Giant Alphabet. Well, Meta will also be required to bring on an independent auditor to confirm that the company is complying with the changes laid out in this settlement. Well, let's just talk about the timing of all this. The trial was expected to last up to seven weeks, and the settlement has not only arrived perhaps earlier than expected, but landed at a size much smaller than investors had feared at the worst end of the spectrum. The financial stakes in this federal case had the potential to be enormous. Meta had said that its exposure to the state's calculation of potential damages could be as much as $1.4 trillion, almost the same as Meta's entire current market cap. And while this was generally considered to be exaggerated, lawyers representing the states had said that $200 billion was a more likely amount, still significantly more than the number unveiled today. So the $17 billion plus just announced is manageable when compared with the company's roughly $90 billion in cash and equivalents disclosed in the latest quarterly report. Well, that is why Meta nudged up over 1% at stock trading upwards today. Rivals Snap, meanwhile, saw its shares down more than 8% as legal action over there looks increasingly likely in months to come. We're going to keep on watching. We're coming up in a moment, a spin through the headlines that are moving the markets today, including the cyber attack that sent Boston Scientific shares sliding.
But first, this episode is brought to you by Charles Schwab. Timing the market, fighting inflation, balancing risk. No one says financial decisions are easy. In fact, it's the exact opposite. Financial decisions can be really tricky and it's often your own thinking that can lead you astray. Financial Decoder, an original podcast from Charles Schwab, can help.