Social media's “big tobacco moment” arrives: Meta (META.US) loses lawsuit in New Mexico and is awarded a $567 million compensation fund

The Zhitong Finance App learned that Meta (META.US) was ordered to pay 567 million US dollars to a compensation fund in New Mexico. This is part of a public nuisance case and one of many lawsuits the company faces due to allegations of harm caused by its app.

The fund is in addition to the $375 million civil fine Meta was sentenced to pay earlier this year for violating the New Mexico Misconduct Act. The second phase of the trial began in May to determine whether Meta's actions constituted public nuisance and might require rectification of its products.

Judge Brian Biedscheid wrote in Thursday's ruling, “Although Meta isn't the only company with this issue, there is plenty of evidence in this case that its social media platform is a significant contributor to the current mental health crisis among New Mexico teenagers.”

Most of the fund's funding — $420 million — will be dedicated to treating people harmed by the platform. The remaining funding will be used to raise awareness and prevention, screening and evaluation, referral and coordination, and implementation, quality improvement, and evaluation.

For Meta and its peers, this case is one of several cases this year that experts have dubbed social media's “big tobacco” moment. In the 90s, tobacco companies were ordered to pay billions of dollars for misleading the public about product safety and potential harm, then their power and influence declined dramatically.

Meta stated in its second-quarter financial filing, “The New Mexico Attorney General has indicated that they intend to seek fines of up to $62.85 billion in this case.”

The court had to weigh a number of factors to determine whether Meta's platform caused public nuisance in New Mexico, as the plaintiffs alleged. Cases involving public nuisance claims usually revolve around the physical world rather than the internet, making it incumbent on the plaintiffs to prove that the damage in the state was linked to Meta's application.

Biederscheid quoted court testimonies from a number of healthcare and other professionals. He pointed out that the state lacked sufficient mental health programs and services to help troubled teenagers who were harmed by social media apps.

causation

According to the ruling, “expert testimony supports a causal link between social media and the New Mexico adolescent mental health crisis.”

New Mexico Attorney General Raul Torres said in a statement, “The ruling makes the company liable for the damage it has caused to our children, families, and schools, and has forced a real change in the way Meta operates in New Mexico.”

A Meta spokesperson said in a statement that the company disagreed with the ruling and plans to appeal.

The spokesperson said, “We work to keep people safe on our platform and have always been transparent about the challenges of identifying and removing bad actors and harmful content,” and “we are confident in our record of protecting the online safety of young people and will continue to defend ourselves against allegations that misrepresent the facts.”

Torres sued Meta in 2023 after he carried out an undercover operation to create a fake social media profile for a 13-year-old girl. He previously told the media that the account was “simply overwhelmed with images and targeted harassment of child abusers”.

The Attorney General said at a press conference before the second phase of the trial began that as part of the case, Torres was trying to force Meta to completely overhaul its app, including implementing features such as effective age verification technology, modifying recommendation algorithms that do not harm children's welfare, and making other changes to “fundamentally restructure Meta's permitted business model in the state.”

In addition to compensation funds, Thursday's order also requires Meta to continue using AI to “improve New Mexico's age guarantee models and tools” and attempt to “develop a dedicated under-13 age prediction model within two years.”

Other remedies include streamlining the process for reporting underage use and “partnering with schools or child safety organizations to create a reporting portal where school administrators can flag accounts of suspected users under the age of 13 on any social media platform.”

Meta, however, was not forced to make any changes to its algorithm, as Biederscheid wrote that doing so might conflict with the protections of Section 230 and the First Amendment to the Communications Regulations Act. The judge added that Meta will not be asked to stop supporting end-to-end encryption on Facebook.

The judge stated that Meta's WhatsApp “is not the cause of the public nuisance that needs to be removed because predators and harmful content are not recommended to teenagers on the platform.”