Meta and states discuss possible mid-trial settlement in teen addiction lawsuit

META +1.07%

Meta Platforms and state attorneys general have held talks about a possible settlement before the trial ends in a lawsuit that accuses the company of intentionally building Facebook and Instagram in ways designed to hook teenagers, according to Bloomberg.

The trial, now in its second week in federal court in Oakland, California, pits the attorneys general of 29 states against Meta. The officials are seeking both monetary penalties and court-ordered changes to how Meta operates its platforms. People familiar with the settlement discussions asked not to be identified because the talks are sensitive, Bloomberg reported.

Meta had no immediate comment from a spokesperson. A representative of the California attorney general's office declined to comment, and representatives of the other three states leading the case — Colorado, Kentucky and New Jersey — did not immediately respond to requests for comment.

Meta's internal estimates put the maximum penalty exposure from an adverse verdict at about $1.4 trillion, a figure close to the company's total market capitalization. Any settlement would likely involve a much smaller amount.

At the center of the states' case are alleged violations of state consumer protection laws and the federal Children's Online Privacy Protection Act. Because the laws can impose fines on a per-violation basis, the potential totals can grow sharply given the scale of Meta's underage user base. The four lead states — California, Colorado, Kentucky and New Jersey — are also pursuing additional consumer protection claims under their own state laws, while all 29 states are pressing federal claims related to the alleged collection of minors' data without parental consent.

The case has drawn attention because it sits at the intersection of youth safety, data privacy and platform design, areas that have become central to how regulators are scrutinizing large social media companies. Meta denies the allegations and has described the attorneys general's demands as requiring unworkable design changes and an "outlandish payout."

During the trial's opening week, testimony came from Instagram chief Adam Mosseri and from current and former Meta employees whose work involved designing the platforms and studying how teenagers interact with features intended to curb excessive use. Lawyers in the case have said Meta founder and CEO Mark Zuckerberg is also expected to testify.

The trial is one of more than 3,000 federal lawsuits against Meta and other social media companies consolidated before U.S. District Judge Yvonne Gonzalez Rogers. California Deputy Attorney General Megan O'Neill told the eight-person jury that Meta's business model was designed to "hook the users, hold them for as long as they can, harvest their data, and then hide the truth from the public." Meta denied that characterization, saying it has made significant efforts to protect minors online.

The case is People of the State of California v. Meta Platforms Inc., 23-cv-05448, in the U.S. District Court for the Northern District of California in Oakland.