Meta Settles With States & White House Ballroom

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2:13This is Bloomberg Law with June Grosso from Bloomberg Radio. This is a breakthrough. This is a milestone. This is transformative. And we're proud of what we've accomplished today. California Attorney General Rob Bonta described the landmark settlement where Mehta will pay up to$18 billion and put stronger child safety measures on its platforms to end a trial over teen social media addiction. This is a significant victory for families across the country, for parents, for children, for those who are suffering in silence and those who are suffering in public. This is a major breakthrough, a milestone moment, a watershed moment, because when it comes to protecting our children's mental health, there is no time to lose.

3:03Under the proposed settlement, Meta agreed to adopt a series of safety features for users under 18, including a two-hour daily cap on using Instagram and Facebook, a lock of the apps from midnight to 6 a.m., and the disabling of features such as like counts. The deal comes in the second week of a jury trial in federal court in California that posed enormous risk for Meta, which has lost both jury trials on youth social media addiction in New Mexico and California. But this is not the end of similar litigation against Meta. The company faces thousands of lawsuits by individuals and school districts across the country.

3:50Joining me is an expert in internet law, Eric Goldman, a professor at the Santa Clara University School of Law and co-director of the Hightech Law Institute. This is being called a landmark settlement. A.G. Bonta said they got as much and perhaps more than they could have in litigation. I mean, how do you view it? The settlement amount is a huge, absolute number. There's no doubt that this is a major financial landmark. At the same time, this number is not a number that materially changes Meta's business. I don't want to say it's pocket change for them, but it's a quarter of their 2025 net income.

4:32In other words, they can afford this. And also, I would point out that Meta was subject to a judgment in New Mexico that ordered cumulatively roughly a billion dollars of damages against Meta. And New Mexico is roughly 0.6 % of the U.S. population. If you were to multiply that billion-dollar judgment in New Mexico by the 0.6 population, actually the$17 billion number looks smaller than we might expect. Bonta said that the money was secondary. What was important was the changes that META has agreed to make. Do you think those changes are significant? The changes are important in part because Metta has resisted them for quite some time.

5:18And Metta has obviously flipped internally and decided that they could live with these particular changes. So the state AGs were able to accomplish something that regulators around the globe have had difficulty forcing Metta to do. What's less clear is if these changes are in the best interest of the constituents that the state attorneys general seek to serve. We don't know if any of these changes solve the quote mental health crisis. We don't know if any of these changes materially benefit any population of users. Simply put, we don't have science to back up that these changes solve any problem.

6:00And we also don't know if these changes will cause other users to have new problems because of the restrictions. In other words, the state detourants general are gambling that these changes are beneficial to users without having the science to back it up. And we'll find out if they're right or wrong. But if they're wrong, then we're going to have a lot of people who actually have been harmed by this agreement. I mean, when I look at some of the changes, like a two-hour daily cap on using Instagram and Facebook and locking Instagram and Facebook from midnight to 6 a.m., even if they don't help teenagers, it doesn't seem like they would harm them.

6:44Let me disagree with you on that one. So let me give you an example of how something like the nighttime restrictions on usage might be disadvantageous. it's been well documented that many teens use social media as a form of coping with mental health episodes that they're dealing with. Now, there might be other teens who are actually suffering mental health episodes because of social media, but let's focus on the users who actually use social media as a coping mechanism. If a teen's having a late night mental health episode, this agreement would say you're on your own to the teen. You know, this resource that you might have relied upon in the past, you might need to rely on now, is simply not available to you because we've decided that's not in your best interest.

7:28So I think we should be careful about assuming that these restrictions aren't actually going to cause other users harm because of the fact that there's so many different use cases. People are using social media in so many different ways to solve so many different problems. And the state AGs have sided on one answer to the question that's not necessarily the only answer. My daughter has grown up, so I'm not familiar with how these safety features might work. Can you explain, are they going to check ages of users? Are they going to require parents to check in? How are they going to implement these?

8:09I describe these categories of restrictions as segregate and suppress. The first step is to segregate the user population between adults and minors. And then the second step is to suppress some resources for the minor population. This agreement codifies that approach. In order to do the segregation, Meta has agreed to deploy age authentication on its user base. And the agreement has very detailed specific provisions about how that age authentication is going to work. Among other things, something that really was interesting to me is that the agreement contemplates that age authentication will never be perfect.

8:47And it actually provides error rates where META can make mistakes and still be in compliance with the agreement. This is really central to the question because it means that there will be some minors who will not be protected by this agreement because of those error rates. And I don't see that as a flaw, but it's actually a big concession by regulators to even admit that that could happen. Do you think that META, the trial was going so badly and Metta saw the writing on the wall, or they didn't want to chance Mark Zuckerberg taking the stand again. I mean, what do you think pushed them to this point?

9:22Well, obviously, the settlement has been in the works for many days, if not for weeks or even months, because it's so long and detailed. And it required the agreement of 51 different state AGs. So, you know, this agreement didn't just happen because this trial has been going poorly. This conversation is much longer standing than that. But I don't know exactly what caused Meta to flip on this particular issue, but this is a standard practice for Meta, that they will push and fight against restrictions until they decided somehow in their interest, and then they're all in. And they're, like, super excited about it.

10:01And as the agreement reflects, and they want everyone else on the same program, too. They're like, OK, we've decided here's what the industry should do. We'll be the first, but make sure everyone else goes on the program as well. So I don't know what caused Meta to reach that point where they decided enough is enough. But it isn't some new thing. It's something that obviously has been on their minds for a while. We had talked before that losing the trial could cause Meta to have to change its platform. Would you consider this platform changes what they've agreed to? Yes, absolutely. And that's why Meta has resisted them for so long.

10:34It doesn't want to make these concessions. It wants to decide how to best cater to its audience without the government putting the thumb on its decisions. So META has given up some of that independence that it's had. It's given up some of that editorial discretion. And the state AGs have taken over those particular aspects of how it operates. The deal includes the appointment of an independent auditor to oversee compliance, someone who can issue their own recommendations and report findings to the states. Do you think that that's sufficient to ensure compliance by Meta? Because I remember some years ago when Meta was still Facebook, it didn't comply with agreements with the FTC over users' data privacy.

11:21Yeah, Meta has a history of having independent auditors that have had no real impact on its business. And so I'm guessing Metta thinks that it got a little bit of a fast one here, that the state AGs are going to think this independent auditor is going to dictate things to Metta. And I'm guessing Metta is thinking it will dictate to the independent auditor. OK, stay with me, Eric. Coming up next on the Bloomberg Law Show, we'll look at the framework for the agreement and how it pushes the state attorneys general to go after Metta's competitors and seek similar deals. I'm June Grosso, and you're listening to Bloomberg.

12:03This is the Bloomberg Tech Minute brought to you by ChatGPT. Now with ChatGPT Work, I'm Carol Masser. Bill Gates Breakthrough Energy Ventures is betting on a cheaper way to produce clean jet fuel and made its first investment from a fund that is backed by Alaska Air, American, and several other carriers. The investment is aimed at accelerating the commercialization of clean aviation fuel. The recipient is Boston-based Lydian, which is developing lower-carbon jet fuel made from hydrogen and carbon dioxide, and is one of a growing number of companies developing next-generation clean jet fuel technology.

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15:21Meta has reached a landmark settlement with every U.S. state except New Mexico and Florida. It agreed to pay up to$18 billion and add stronger child safety measures to its Facebook and Instagram platforms. But 30 percent of the settlement amount, about$5.3 billion, will be released to states only if rivals YouTube and TikTok meet two conditions, implementing similar safety features and paying the same amount, split between the two companies. California Attorney General Rob Bonta explained the deal's reliance on Meta's competitors to sign on in order to get Meta to put in heightened restrictions.

16:09There are some restrictions. One example is the limit of two hours of use per day. If that applies to just Meta, then it remains two hours. But if other industry players make commitments similar to what Meta has made here, then the commitment, the restriction ratchets up to one hour per day. And that is the hope. I've been talking to Professor Eric Goldman of Santa Clara University Law School. Eric, so Meta said, the framework will only work if all our peers join us. Because teens move fluidly across dozens of apps, we need an industry-wide solution. Is that what this is really about? This is a Meta-specific issue.

17:00Meta really, really does not like being obligated to comply with laws that its competitors don't also have to comply with. So Meta is less resistant to legal compliance. It's more willing to accept that the regulators can tell how to run this business, but only if in Meta's mind, it's a level playing field. So it was absolutely critical to Meta in this case that if it settled, it was going to drag along its competitors, whether they really wanted to be dragged along or not, to the same deal so that teens can't just check out of Meta, go to the competitor down the information superhighway and get a better deal there.

17:42And Meta then is at a competitive disadvantage. And it mattered so much to Meta that they did two things of interest. The first is that it agreed to restrict miners' usage of Meta even more if other competitors agreed to the same restrictions. So that's a carrot for the state AGs to go out and get even greater alleged protection for miners if they can get the competitors under that program. The second thing is that Meta conditioned a large chunk of the payments on the state AGs going out and getting the competitors under the same program. In other words, essentially, Meta has now deputized the state AGs as its police against its competitors and is paying them to do its dirty work.

18:32So the state AGs might think that this is a win, but Betta is also looking at this as we got the state AGs to go off and harass our competitors, and we're willing to pay them to do that. Speaking about the competitors, and Bonta said in the press conference, we already have a case against TikTok, and we'll start focusing on that. And he mentioned Snap and YouTube as well. So will this settlement encourage other social media companies to make similar settlements? Well, so that's the point. The agreement motivates the state attorneys general to go after those competitors in order to get the extra payday that Meta is dangling in front of them.

19:17So the competitors may not like this deal at all, but now Meta and the state agencies are collaborating together against these other competitors. So I can assure you that YouTube and Snap and TikTok are reading this agreement. At each line, you could just see the anger bar rising in their heads because this is an agreement that's against their interest. They had no saying the agreement. And now Meta is throwing hundreds of millions of dollars at this problem to try to get the state AGs to find them. As far as the other cases that are going on, I know Tennessee has an ongoing case against Meta, right?

19:57What happens to those? So Meta was currently in trial in Oakland in the federal MDL, but there were other lawsuits that are taking place throughout the country. And this agreement actually wraps up all of those. Even the ones that weren't part of the MDL were consolidated together, but were taking place independently. This agreement wraps up most of those. And I think the way I read it resolves them. So, for example, Meta just appealed one of the rulings from Massachusetts and Nevada to the U.S. Supreme Court. And I believe that this agreement moots that appeal because those two states have agreed to this broader agreement.

20:41The one state that didn't agree was New Mexico. New Mexico got this pretty sizable judgment. And I think it looks like the New Mexico attorney general thinks that they're going to stick it out and they're going to get their own independent resolution with Meta. And the Florida AG posted today that they're going to reject the$17 billion settlement. He called it a slap on the wrist for a trillion-dollar company. So we'll see where that goes. And there are also thousands of other cases out there against Meta, right? Personal injury cases and school district cases. This settlement only applies to the claims by the state attorneys general.

21:22It doesn't apply to any of the other pending litigation that's been brought by the school districts, the Native American tribes, and by individual victims, of which there are thousands of individual victims who've already sued META. So at the moment, all of those cases are essentially unaffected by the settlement. And that's why META essentially is only resolving part of its legal liability. And there's a large overhang of additional legal risk that it still needs to resolve. This settlement doesn't have any bearing on that. What about the comparison being made between this and the big tobacco settlement?

22:00That this is a major development in Internet law. This is a major development in social media. This is a major development for Meta. And I think it's a major development for the state attorneys general who are part of the settlement. But does it change the industry? And the short answer is we don't know. This clearly will change Meta's practices, but we're not sure how much of an effect that's going to have on Meta's users. And we don't know if it's going to be positive or negative. And even if all of Meta's competitors were bound by the same agreement, we still don't answer those fundamental questions.

22:37How does that affect user engagement with social media? And does it end up being a net win for users? So the big tobacco moment was really the idea that we were making some demonstrable progress against a longstanding health risk to our community. And I feel like this is just qualitatively different because for all we know, these agreements are actually going to exacerbate the problems that it was trying to solve. And so it's actually potentially counterproductive. Is there anything else that concerns you, broadly speaking, about this settlement? The agreement represents the concession of Metta of certain editorial decisions that it traditionally have the prerogative to make.

23:22And it's interesting and a little uncomfortable that the state attorneys general have bound Metta to that. In a sense, this was part of the bargain for price was the state AGs getting remedies that might very well have not been available to it in court because of the fact the restrictions on free speech that essentially the state AGs are controlling how Meta talks with its users. So there's something disquieting about the idea that Metta and the state AGs have agreed to what are fundamentally restrictions on Metta's freedom to publish, especially when we don't even know if that's constitutionally permitted.

24:04One possibility this agreement will look really weird if that question gets answered by the Supreme Court. And the Supreme Court says that states have no power to dictate how online publishers present content to users. This agreement met as agreed to that. And it might very well be that that agreement is based on an unconstitutional premise. Would that make the agreement invalid then? I don't think so. I need to go and take a look at it. There might be some boilerplate about that. I will note that the agreement is 10 years long. So another possibility is that this agreement is going to go poof.

24:38And at that point, who knows what the industry will look like. But at that point, we might have some legal answers that make it clear whether or not this agreement ever was properly formed in the first place. Thanks so much, Eric. You really brought out some fascinating aspects of this settlement that run below the surface, shall we say. That's Professor Eric Goldman of Santa Clara University School of Law. This is the Bloomberg Tech Minute brought to you by ChatGPT. Now with ChatGPT work. I'm Carol Masser. Bill Gates Breakthrough Energy Ventures is betting on a cheaper way to produce clean jet fuel and made its first investment from a fund that is backed by Alaska Air, American, and several other carriers.

25:23The investment is aimed at accelerating the commercialization of clean aviation fuel. The recipient is Boston-based Lydian, which is developing lower carbon jet fuel made from hydrogen and carbon dioxide and is one of a growing number of companies developing next-generation clean jet fuel technology. Lydian says it can reduce capital expenses by more than 50 % compared with competing technologies. Lowering those costs is seen as crucial to making sustainable aviation fuel, or SAF, commercially viable, as it remains far more expensive than conventional jet fuel. Today, clean fuels represent a tiny fraction of the overall market.

26:03That's the Bloomberg Tech Minute brought to you by ChatGPT. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com today by selecting Work Mode, available on Plus and Pro Plans. Let's talk about healthcare for a second. It doesn't always work the way people expect it to. If you've ever waited on a prescription refill or had a hard time getting the care you needed, you know the feeling. The system should just work better for everyone. That's exactly what the people at Optum are trying to do every day. They're a health care company linking patient care and pharmacy services and using data and technology to drive the whole system so care is connected, not complicated, for patients and providers.

26:47Things like making it easier to get care that looks at the whole person, from primary care doctors to mental health support and even in-home care, and then using technology to make sure they all work together. technology designed to help doctors spend less time on busy work and more time with their patients. And those prescriptions? Optum is working to bring costs down, save patients money, and make it easier to get refills. Little by little, Optum is helping make healthcare work as one for everyone. Head to business.optum.com to see how. Wise is the smart way to manage the currencies you need around the globe.