Why governments are suing Meta for $18 billion

**Akshara** (0:04)
In today's episode, we'll do one deep dive and cover another story for the day. First, we'll talk about when social media stopped looking innocent, and then we'll talk about SEBI finding another SME IPO fraud.
Welcome back to The Daily Brief by Zerodha, where we cut through the noise to help you understand what's actually happening in the most important stories from business and markets. I'm your host Akshara, and today is Friday, 4th September. Coming to the first story.
So there's a decent chance you found this story through one of the platforms it's about. Maybe it appeared on Instagram, maybe someone sent it to you on X, maybe YouTube or another app. And when you finish watching, there'll almost certainly be something else waiting for you. That ability to always have the next thing ready is now at the center of one of the biggest fights over social media.
So on August 26th, Meta agreed to settle a case brought by US states that accused Facebook and Instagram of using design features that encouraged children and teenagers to keep using the apps compulsively. And this multi-state settlement could cost Meta up to $18 billion.
But Meta did not admit wrongdoing. Now that number sounds enormous, but Meta does not have to pay it all at once. The settlement is spread over 10 years and part of the amount is conditional. And the settlement also does not prove that Instagram caused America's youth mental health problems. But Meta has agreed to change how its apps work for younger users. And that makes this a strange place for social media to have ended up. 20 years ago, the goal was to get more people onto social media. But today, governments are asking whether children should be on these platforms at all.
Now, the early story of social media was almost the opposite of the one we tell today. Facebook arrived in 2004 and Twitter in 2006, and their promise was easy to understand. They let ordinary people reach a large audience directly. And before this, newspapers and television channels decided who got hurt. So social media lowered that barrier. Now, anyone could publish, find an audience or organize a group. And for a while, that looked enormously empowering. So Arab Spring began in Tunisia in December 2010, after street vendor Muhammad Bouazizi set himself on fire after repeated harassment by local officials. The protests that followed soon spread across the region, and social media mostly helped information spread faster. But over time, people started seeing another side of social media. A Cambridge University researcher named Alexander Cogan built a personality quiz app on Facebook. And Facebook's rules at the time allowed the app to collect data from the people who used it. The app could also collect data from millions of their Facebook friends, and it was later confirmed that Cogan's app also collected data this way. Now, some of that information later reached Cambridge Analytica, and Facebook said Cogan broke its rules when he shared the data with the company.
It was the time of US elections, and Cambridge Analytica used that information to build profiles of voters. Political campaigns could then show different messages to different kinds of people based on their profiles, with the intention of influencing their votes. Now, how much of this actually influenced the 2016 US election is still debated. But the scandal also turned attention towards Facebook. Its platform had allowed outside developers to collect information about millions of people who had never used those apps themselves. So US regulators eventually went after both sides. The Federal Trade Commission took action against Cambridge Analytica and Kogan, and it also brought a separate privacy case against Facebook. Facebook eventually agreed to pay a $5 billion penalty. Now, this changed how people in general looked at Facebook. And it was not simply a place where friends posted things for each other. Facebook also watched how people behaved on the platform, and it used those signals to decide what appeared in each person's feed. Which raised another question. Why did Facebook want to get so good at predicting what people would watch or click next? Part of the answer was simple. These platforms made money from advertising, so the longer people stayed on these apps, the more opportunities the platforms had to show ads. That made attention valuable. But that doesn't mean every feature was built to be addictive. But it gave the companies a clear reason to keep people coming back. And over time, the products got better at removing the little moments when we might otherwise stop. A newspaper eventually runs out of pages, but infinite scroll does not. Finishing a television episode normally forces you to decide whether to watch another, but autoplay removes that decision. Close the app, and a notification could pull you back. Snapchat streaks gave people a reason to come back every day, because missing a day can break the streak they've built. So the concern around social media therefore moved from what people posted and their personal data to how the apps themselves were designed. That was harder to escape because a few big platforms accounted for much of people's online attention. And moving from Instagram to TikTok, YouTube or Snapchat often meant entering another app built to keep you engaged. And the concern became sharper when the users were children and teenagers. In a 2025 Pew survey, 48% of American teenagers said social media had a mostly negative effect on people their age, up from 32% in 2022 But only 14% thought it had a mostly negative effect on them personally. That brings us to the harder question. Are these fears actually backed by evidence?