Meta has agreed to pay $16.7 billion to settle a case brought by a coalition of state attorneys general over claims that Facebook and Instagram harmed children's mental health. The deal, reached during the second week of a federal trial in Oakland, requires Meta to add daily usage limits and nighttime blocks for teen users, and shares gained 5% in premarket trading after the news broke.
States settle federal trial over child safety claims
Meta and a coalition of state attorneys general have settled a federal case alleging the company misrepresented the mental health harms its apps cause to children. The case was brought by 29 states and co-led by California Attorney General Rob Bonta along with the AGs of Colorado, New Jersey and Kentucky.
The settlement, revealed in a court filing, calls for Meta to add daily usage limits and nighttime blocks for teenagers on Facebook and Instagram, along with enhanced age-assurance measures and new tools for parents. California could receive $1.5 billion to $2.1 billion of the total once the court approves the deal. Bonta said the agreement will "make social media less dangerous for our kids."
Payment spread over a decade
Meta said the settlement agreement includes a payment of approximately $18 billion, to be distributed in annual installments over 10 years. Participating states would receive about $12.7 billion, or 70%, of that total. The remaining 30% is contingent on Google's YouTube and TikTok adopting similar changes for younger users, with Meta's rivals required to match that portion of the payment. Meta expects to accrue a legal expense of about $10 billion in Q3'26 tied to the agreement.
Meta stock swings on the news
The stock rallied in early trading before sliding, last down a fraction, according to Investor's Business Daily, which noted the settlement came in below some estimates of the penalty Meta could have faced.
Other child-safety cases continue
The states-led case is one of several legal actions Meta faces over allegations it designed its platforms to be addictive to children. Meta previously lost both phases of a lawsuit brought by New Mexico, where a jury ordered it to pay $375 million in March and a judge later ordered an additional $567 million in August. Snap, Alphabet and ByteDance still face separate lawsuits over similar claims.
Sources: CNBC, The Guardian, Investor's Business Daily
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