Jury Finds Meta, Google Liable for Addiction

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0:39Chase for business. Make more of what's yours. The Chase mobile app is available for select mobile devices. Message and data rates may apply. JPMorgan Chase Bank N.A. Member FDIC. Copyright 2026. JPMorgan Chase and Company. So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now, a global workforce of 300 ,000 can use AI to fill their HR questions, resolving 94 % of common questions. Not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business.

1:20Let's create smarter business. IBM. Bloomberg Audio Studios. Podcasts, radio, news. Yeah, this is difficult and worse from analysis. So two of the big movers to the downside within the technology sector are Alphabet, the parent of Google and Meta. Meta having its worst day since the end of October, October of 2025 last year. The morning started with Mag 7 under pressure because of the belief by the market that the war in Iran will be prolonged. But there was a big piece of news in the last 24 hours, a jury verdict finding Meta and Google liable for harming a young social media user with products that the court decided were deliberately or negligently designed to be addictive.

2:08This was the first social media addiction trial. Let's bring in Bloomberg's legal reporter, Madeline Meckleberg, who was in the courtroom for that verdict. And let's start with the very basics, the jury decision, what that decision was based on, predicated on. And we'll go from there. Madeline. Right. So a jury in Los Angeles spent about nine days deliberating on evidence that they heard over a roughly four week trial. They heard from people including Meta CEO Mark Zuckerberg, Instagram head Adam Aseri. but then they also heard from people within the life of this young woman who brought the suit who were able to speak about the harms and suffering that she experienced as a result of using these platforms.

2:53But these cases, as you mentioned, are about this claim, this central idea that these companies knowingly and intentionally designed their platforms to be addictive and should have known that they would cause harm to young users. Therein lies the crux, Madeline, because before the arguments had been about the content from which in many ways they are shielded. But this is about how we are served said content more broadly. What is it that is deemed to be harmful? And are we already expecting the business model changes are going to be interpreted from this? Because things have changed. Companies have responded to a certain extent, but they were deemed in many ways negligent because there weren't warnings to younger people.

3:37Right. That's why you've heard this case be referred to as a landmark case, because this really is a novel legal theory. As you know, these companies have been shielded from immunity from suits alleging harm by users due to content on their platform. But this is about the design. So jurors heard a lot about the algorithm itself. And then they heard a lot about features that these companies use that they had experts come in to say are designed to be addictive. They called it addiction by design. That's being peppered with notifications. that endless scroll, being able to pick up your phone and scroll through the social media feeds and not really reach an end of content.

4:16It's about videos that automatically play once you finish watching one. And so they say that all these features cumulatively are designed to hook you and keep you on the platform as long as possible, and that children are particularly susceptible to those kind of features. We just showed statements on the screen, but in summary, both companies disagree with the verdict. Meta's looking at its legal options. Google plans to appeal. And as we said at the start of the segment, both stocks are under pressure. Later in the show, we'll get into the kind of business and what side and why the stock's under pressure.

4:46But you set out what happened, Bloomberg's Madeleine Mecklenburg, who was in the courtroom in Los Angeles. Thank you. Joining us now with more on the implications of the case is Eric Goldman, Associate Dean for Research at Santa Clara University School of Law. And Eric, you've joined us throughout this process. We now have a jury verdict. I think to start, just your response to the outcome of this specific case. The whole point of the jury trial is that we needed an answer from average Americans about how they viewed the culpability of social media services, and we got unanswered. It's an answer that I think the defendants don't like.

5:25The plaintiffs, I think, are happy with it. But it's just one answer of what is expected to be multiple answers coming from additional trials. again the companies do not agree with the outcome google plans to appeal we know meta is looking at his options one of the things that you're cited as as looking at is the level of damages awarded in this specific case and i think we discussed in prior conversations the context that there are other legal proceedings going alongside this in parallel with this case but why focusing on the damages? Why is that important? It allows the parties to start to estimate how much money are we even talking about.

6:05And until we got a data point like the jury verdict, really the parties couldn't even imagine any agreement. They were so far apart. Now we can start to quantify the numbers. If there's 3 ,000 plaintiffs that are currently pending, we're talking about roughly close to$20 billion. Now, those are numbers that are huge. And yet there are numbers that Google and Meta might think that they can afford. So now that we know how much money might be in play, there's new grounds for discussions about settlement. It's not just the consumer protection angle, though, but there's also the public schools, there's estates, Eric.

6:41But I want to go to what happened earlier in the week on Tuesday in New Mexico, because actually a much larger sum of money was being demanded of Meta after it was deemed not to have protected teenagers in that particular state when it came to sexual predators. Now, can you weave in that particular legal strike on Meta and what that means more broadly in this context? Yeah, it's a reinforcement that, again, a different jury was asked essentially the same set of questions. How responsible are social media for the harms that their users suffer? And the jury came back with functionally the same answer.

7:16Now, in that case, they were limited in terms of how many damages they could assign to any particular victim. So we don't really know how that number might have looked if a different set of legal theories were used. But it is the sign that we have two juries saying we will impose substantial damages on social media. Those are two really key data points. And Eric, of course, as we've mentioned, both companies disagree. And Google is coming out strongly saying you misinterpret our very business model. YouTube is not a social media platform. it's a streaming platform whereas meta is looking at its own arguments but more broadly its argument has been there is so much more to mental health than one particular platform one particular app and they actually had some evidence from various doctors showing that in some ways certain of these social media platforms offered positive narratives to the it was indeed a woman called Kaylee we understand who brought up the particular court case in this hearing Eric what What do you make of those arguments?

8:21I think that it's so easy to focus on the parties in the courtroom. We have Kayleigh, the victim, and telling her story. And we've got the social media services telling their story. But there's a whole bunch of other individuals who are affected by the discussions taking place in that courtroom. There are many users who benefit extensively from social media, who make it an integral part of their day and often the best part of their day. And if there were any changes in social media, either due to the financial pressure or due to legal compulsion, those benefits for those other users might reduce or go away.

8:59And none of that was really relevant to the trial. And as a result, there's a lot of people who are going to be affected by these cases who don't even have a voice in the proceedings. Well said, Eric Goldman. Appreciate you coming on Santa Clara University School of Law. Really deep dive there. Now coming up, we've got more on the wider market implications for tech after the landmark social media addiction verdict against Meta and Google. From New York and San Francisco, this is Bloomberg Tech.

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11:50We're looking at Meta and Google. Meta in particularly on track for its worst day since October. The summary of the sell side is that there is going to be an overhang on this name. a headwind, a risk relating to social media addiction because the landmark jury verdict holding Google and Meta liable for harming a young user is being compared to the groundbreaking cases that force changes for big tobacco. That could have an impact on social media firms, advertising businesses. Let's get out to the news, Kurt Wagner, who leads our coverage of social media as an industry. This is what you've been writing about, that Meta and Google risk a big tobacco-like response because of the outcome of yesterday's trial.

12:31What's the reporting telling us? Yeah, well, you know, the jury found that these products can be addictive, right? You think of other consumer products over the years that have been found to be addictive. Big tobacco is probably top of that list. And you see the tarnish on an industry like that. And you have to sort of think, is this the same kind of thing that's going to be happening to the social media platforms? You know, Eric was just talking with you guys in the last segment about the fact that there are thousands of other cases looming with similar arguments. This is just the first. Obviously, each case is different.

13:02But if you sort of look at what's happened this week between New Mexico and the trial in L.A. and say, OK, juries are buying this argument. Juries are believing that these companies and platforms are responsible. And you extrapolate that out thousands of times over the next couple of years, you suddenly are looking at a very different industry with a very different reputation. And Kurt, this comes with the current context that already the landscape has shifted. Australia has a ban on 16s and under. We're looking at Asia replicating. Europe is discussing, even California thinking about it. And at the same time, we've actually seen the companies try to respond with changes.

13:37And they're certainly telling us about the changes and the protections that certain parents and kids have. Will business models have to change? I think that's the ultimate question, because if they just simply have to write a check and this problem goes away, what's the incentive? These are trillion-dollar companies. they're not going to, you know, clock at writing a$6 million check. If Congress, especially in the U.S., sees these types of trials, sees these verdicts, sees the momentum that's being built around the child safety sort of movement here and says, hey, look, this is sort of what we've been talking about but been dragging our feet on.

14:13We're going to pass a law that changes some of these features and forces the companies to change their products. Now it gets really interesting because if these companies can't get people to come spend as much time, spend as much time scrolling. Obviously, that's going to affect how much money they can make from revenue. These are attention-based businesses. And so anytime the attention is not on them, it could hurt. Kurt, in the report that you did with Alex on the possible product changes, what are they? And part of those that are taking legal action against the companies, they are pushing for specific changes or features on those platforms.

14:47And what are they? So the individual plaintiffs, like what we saw this week in L.A., those are personal injury cases. They're not seeking changes to the product, but the school districts that are suing these platforms are seeking changes. I spoke to one of the lead lawyers who's going to be representing the school districts yesterday. She talked about notifications as being a big one, right? Bringing people, sometimes in the middle of the night, to open up their phone and go on these services. You talk about parental controls. Age verification is a big one, making sure that young kids that aren't supposed to be on these services are not on them.

15:20So those are the types of things they're going to be pushing for. And, you know, those also align with what we see members of Congress talk about. They just haven't really gotten anything over the line in terms of the law here. Rumeau's Kurt Wagner, who's been across this story. We thank you so much. Let's get more of what this means for the business model, what it means for the market. Minda Smiley, senior analyst covering social media at eMarketer, joins us now. Minda, do you anticipate significant changes to revenue for these companies off the back of these landmark cases? Yeah, I mean, I don't think we're going to see any big changes happen overnight, right?

15:54I think I'm going to draw a parallel to TikTok here. You know, whenever we saw a lot of uncertainty around the ban and we didn't know exactly what was going to happen to the app in the U.S., we actually didn't really see a lot of advertiser pullback or even user pullback. So, you know, that's all to say that I think in these moments that are very, you know, headline grabbing and whatnot, even though they are big news, it doesn't necessarily mean that we're actually seeing marketers pull back quite yet, users pull back quite yet. Now, that's not to say that in the long run that, you know, that won't change.

16:27I think ultimately, as Kurt was saying, if we do see these products or these apps and these platforms significantly change in terms of how people can use them, what features are on them, then yes, that's the moment I think we would definitely see a larger pullback from marketers and users. And Minda, it's so interesting that, of course, you referenced TikTok, because we should remind the audience that TikTok and Snap settled ahead of this trial. But they, too, are implicated in a lot of the other cases. And this isn't just a meta and a Google issue more broadly. So how far and wide could this net be cast?

17:01Yeah, it's a great question. I mean, obviously, in this exact case, like you said, it was just meta and YouTube. But this is just the very beginning. And I think ultimately we could see a world where, yeah, all of the major social networks, Snapchat, Instagram, Facebook, all the ones that continually come up in these conversations could be implicated. I mean, there's something I think that you guys at eMarketer recognize is that away from that specific case, broadly, the social media industry is facing change. young people, and I don't use that term too broadly or lightly, don't consume as much or spend as much time on social media.

17:42That's a kind of conscious thing. Equally, you know, the landscape is a battle for eyeballs. You know, you have a choice of where you spend your screen time. Where does this factor into that broader landscape? Yeah, it's a great question to me. That's something I've been talking about a lot lately, is that none of this is happening in a silo. I mean, these verdicts are landmark cases for sure, but we are seeing just generally social behaviors evolve and shift as they always do. I mean, we are seeing time spent on social media in the U.S. kind of hit a wall. To be clear, people still spend incredible amounts of time on these platforms, which is why these cases are happening in the first place.

18:21But we are kind of seeing, you know, that major growth that's been happening for years now is starting to hit a wall. And we also are seeing the beginnings of sort of a backlash to social media, especially among younger people who are really, you know, they kind of know that they are addicted to these platforms and yet they also want to get off of them. They feel quite disillusioned by them. There is this push to be more mindful of how much time you're spending on social media. That's why we're seeing companies like Brick come up. And just this push to really get off of screens in general and get offline.

18:54So these social media companies, they're dealing with these verdicts, but they're also just dealing with like larger behavioral issues that are having an impact. Minda, big tech, more specifically social media, having a big tobacco moment. That's not you. We've heard that before. It kind of comes and goes. This time, is it any different? Yeah, it's I does feel like this time is going to be different. I do think so. I mean, again, And I don't think we're going to see massive changes overnight. But, you know, these are being called landmark cases for a reason. And the fact that these juries are not coming out, you know, in the favor of these social media companies is not a good look for them.

19:31And I do think even, you know, I was talking earlier about how, you know, I don't think we're going to see like a massive hit to add revenue or anything like that. But I do think it's going to, you know, marketers and users alike, parents, you know, all kinds of stakeholders are going to be, you know, further thinking about how they show up on these platforms. And I think there is an element of, like, reputational damage that is already happening in terms of, like, you know, do we want to be showing ads on these platforms that are increasingly just looking like, you know, don't have a great reputation right now.

20:03And I think, you know, for a while the reputation hasn't been great, but it's certainly not getting better at this point. So we could see some shifts happening there for sure. Meta is down more than 5 % having its worst day since October. Minda Smiley, senior analyst at E-Marketer, thank you very much. We've got a lot more on this topic. Our own original investigation can't look away. The case against social media is available on all Bloomberg platforms. Now coming up, regulators in Europe are also stepping up scrutiny of online platforms. We have more on that next. This is Bloomberg Tech. The thing about AI for business, it may not automatically fit the way your business works.

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23:09It's time now for Talking Tech. And first up, China's food delivery leader, that's Meituan, posted a modest 4.1 % increase in sales. Look, the company's expansion efforts outside of China helped offset price war pressures from Alibaba and JD.com. Still, that rivalry has weighed on the stock, which is down 45 % over the past year. Plus, Moonshot AI is in early stages of considering an IPO in Hong Kong. Now, that's according to sources. The company behind the Kimi chatbot has reportedly held talks with China International Capital and Goldman Sachs, though deliberations are still ongoing. And in Europe, where regulators are stepping up scrutiny of online platforms.

23:44Now, the EU has launched an investigation into Snapchat, focusing on how it verifies its users' ages and addresses risks like grooming, criminal activity. At the same time, it's advancing a separate probe at the moment into pornography platforms. The sober concerns it failed to adequately block minors from accessing its sites. Ed. Just taking another look quickly at MetaCaro because the stock is down severely. Two standard deviation move on track for its biggest drop since October. And actually that drop is deepening. Remember, a jury verdict finding both Meta and Google liable of harming a young user with negligible deliberate product design to make social media addictive.

24:23Okay, coming up on the program, Rachel Holt from Construct Capital is going to join us to discuss early stage investments in startups modernizing critical industries, venture capital, startups, and the private markets. It is halftime from San Francisco and New York. This is Bloomberg Tech.