U.S. Sends Iran Plan to End War

Luke Vargas (0:03)

In a landmark verdict, Meta is found liable for allowing adults to prey on children. Plus, mediators push the US and Iran to talk, but the sides remain far apart.

Benoît Faucon (0:14)

The Iranians haven't responded. There is no talks, there is no discussion. They haven't agreed to meet, and even they actually fear it could be a trap, that it could be just a proposal to ease all crises.

Luke Vargas (0:24)

And China's Communist Party cracks down on wine. It's Wednesday, March 25th. I'm Luke Vargas for the Wall Street Journal, and here is the AM Edition of What's News, the top headlines and business stories moving your world today.

Meta has been found liable for failing to protect young people from a range of online dangers, including sexually explicit content, solicitation, and human trafficking. That was the conclusion of a New Mexico jury yesterday, a verdict partially read out here by Judge Brian Beechield.

SPEAKER_3 (0:56)

On question one, did Meta violate the Unfair Practices Act by engaging in an unfair or deceptive trade practice? The jury answers yes. Question two, did Meta act willfully by engaging in an unfair or deceptive trade practice? The answer is yes.

Luke Vargas (1:19)

I asked journal tech reporter Sam Schechner to help untangle the verdict.

Sam Schechner (1:22)

This is a case under state law and the state is using its particular code to go after a company. But if you step back, what we see is a state presenting evidence that a company allegedly ignored warnings about the dangers on its platform and that the state argues that its design features let pedophiles engage with children. And what I think it shows is a new willingness by states, by courts, and now juries to hold social media companies responsible for what happens on their platforms. And that's a verdict and a trend that goes beyond even Meta and beyond even social media.

Luke Vargas (2:00)

And you told me offline, Sam, that there's a bit of a split happening here. These social media companies are under pressure sort of globally right now, but how that is being pursued in the US has some distinctly American features compared to what we're seeing elsewhere.

Sam Schechner (2:14)

There's been, I think, building for a decade now, a sort of backlash against some of the perceived harms from social media. We had the Facebook files at the Wall Street Journal looking at internal documents from what was then Facebook and has since been renamed Meta. And in Europe, for instance, the EU passed the Digital Services Act. And that's a law that basically holds companies responsible for content on their platform and threatens them with big fines if they don't have robust systems for moderating it or handling potential problems. In the US, there's no nationwide law that does that. There's some consumer protection law, there's state laws, and so what we see is states and groups of states, but also individuals and class action lawsuits going to court to try to force these companies to either pay damages and ideally what they're aiming for is to change their practices underneath. There is however a lag time with all of these approaches. Because we're litigating the fallout of the social media revolution that began a generation ago. It remains to be seen how quickly courts, individuals, governments will tackle what we're seeing in the AI revolution. There are already a wave of lawsuits about AI chat bots and so that is just starting to work its way through the courts.

Luke Vargas (3:28)

That was Journal Tech reporter Sam Schechner in Paris. Sam, thanks as always.

Sam Schechner (3:32)

Thanks for having me.

Luke Vargas (3:33)

As Sam mentioned, a jury is currently deliberating a similar case in Los Angeles in addition to more than 2,000 lawsuits pending in federal court. A Meta spokesman said the company disagrees with the verdict in New Mexico and plans to appeal. As part of yesterday's verdict, Meta was ordered to pay $375 million in civil penalties. It made 160 times that amount of revenue in the most recent quarter. And if Meta has its way, it could be making substantially more money in the next five years. The company is rolling out a new stock incentive program for top execs that could see some earn hundreds of millions of dollars if its market cap tops more than $9 trillion by 2031, a massive leap from its current $1.5 trillion. Meta has leaned heavily on stock awards amid the AI race, with the journal analysis finding that cash costs tied directly to those awards consumed 96% of its free cash flow last year. Shares in British semiconductor designer Arm Holdings have soared off hours after it announced plans to sell its own chips for the first time, putting it into direct competition with long-time customers like NVIDIA and Alphabet. The new chip has been developed with Meta for use in data centers with OpenAI, SAP and CloudFair also signing on as customers. Arm Designs power nearly every smartphone and tablet. Meanwhile, South Korean chip giant SK Hynex is eyeing Wall Street. The company plans to list in the US later this year, looking to tap into global cash to fuel its high-end AI chip production. The exact size and timing of the listing is still under wraps, with SK Hynex saying it will make a final decision on whether to list after the SEC's review and considering market conditions. And I can't believe I'm saying this, but the maker of a toothy elf named Labubu has seen its profits quadruple to nearly $2 billion after the toy became a global status symbol. China's Pop Mart specializes in so-called blind boxes of collectible toys, where you don't know which character is inside until you open it.