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U.S. social media titan Meta shares jumped nearly 5% in premarket trading on Wall Street Wednesday after the company reached a settlement of up to $16.7 billion with 29 U.S. states, easing the risk of potentially far larger penalties from a lawsuit alleging that its platforms harmed children.
The agreement ended a federal court trial in California and removed the immediate risk of a much larger financial judgment. Meta had disclosed before the trial that California, Colorado, Kentucky and New Jersey were seeking up to $1.4 trillion in penalties, although the states later indicated the figure would be closer to $200 billion.
The deal requires Meta to make nationwide changes to Facebook and Instagram for teenagers, including default daily usage limits and nighttime blocks. The company also has to strengthen age-assurance measures to keep children from accessing its platforms and restricted content and provide additional tools for parents and guardians.
Meta does not have to acknowledge wrongdoing under the agreement. In court documents, the company denied the allegations and rejected liability to the plaintiffs.
Reuters reported that the settlement was reached during the California trial, resolving a closely watched legal challenge over allegations that Meta's platforms harmed young users.
The case accused the company of designing Facebook and Instagram to maximize engagement among children and teenagers and alleged that Meta knew about potential mental health and safety risks associated with its services.
The states also sought broad changes to the platforms, including measures aimed at preventing children from creating accounts, according to court filings reviewed by Reuters.
Attorneys general from California, Colorado, Kentucky and New Jersey alleged that Meta's products were designed to be addictive and accused the company of violating federal privacy and consumer protection laws.
The states argued that Facebook and Instagram contributed to a national mental health crisis among children and teenagers. Meta countered that the states focused on selected features while overlooking safeguards already available to younger users.
Those safeguards include teen accounts that automatically become private, time-limit reminders, parental supervision tools and restrictions on who can contact teenagers and which content they can view.
The agreement follows other major cases involving the company. In March, a New Mexico jury and judge fined Meta more than $900 million after the state's attorney general argued that its platforms created a public nuisance.
In California, a state court also found Meta and Google liable after a young woman alleged that the companies, among others, contributed to her deteriorating mental health.
The latest settlement still requires judicial approval.
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