Meta Platforms Inc (NASDAQ: META) shareholders are advised to stay alert as the company enters a critical courtroom showdown on Tuesday in Oakland, California. The company will face state attorneys general in a major trial alleging violations of child safety and consumer protection laws, with claims that its platforms contribute to mental health deterioration among minors.
The trial, presided over by U.S. District Judge Yvonne Gonzalez Rogers for the Northern District of California, stems from a multi-state lawsuit initiated in 2023 by 29 states. The outcome of this case is widely expected to serve as a key benchmark for subsequent similar actions across the country.
This week's proceedings involve attorneys general from California, Colorado, Kentucky, and New Jersey. High-profile testimony is anticipated, with Meta CEO Mark Zuckerberg and Instagram chief Adam Mosseri both expected to take the stand.
In their filings, plaintiffs argue that Meta developed and continuously refined a range of psychologically manipulative platform features designed to maximize the time spent by teenage users. These features include infinite scrolling news feeds, autoplay videos, and like-button mechanisms. State prosecutors further allege that Meta deliberately misled the public by marketing its applications as safe, despite internal knowledge that its products could cause harm, including anxiety, depression, and suicidal tendencies.
The plaintiffs also contend that Meta violated the Children's Online Privacy Protection Act (COPPA), accusing the company of knowingly collecting data from users under the age of 13 without obtaining parental consent, despite being aware that a large number of children were registering for accounts.
Meta has denied all allegations and is contesting the potential damages as unreasonable. The company estimates that the maximum potential liability in this case could reach $1.4 trillion, a staggering figure when compared to Meta's current market capitalization of approximately $1.5 trillion.
A spokesperson for Meta released a statement dismissing the lawsuit's merits, saying: "The state attorneys general have called this a landmark case, but their claims lack factual basis and the damages sought are wildly disproportionate. They have failed to demonstrate that any resident of their states was misled, and they even suggest that standard features like creating additional Instagram accounts are harmful. They are attempting to punish Meta for the industry-wide challenge of age verification. Instead of grounding their case in facts and law, they are pursuing astronomical payouts. We have always built robust protective measures for teens and look forward to presenting our case fully in court."
In the United States, Meta and other major social media companies are confronting thousands of lawsuits alleging platform-related harm to users. Earlier this month, a federal court in New Mexico ordered Meta to pay $567 million to improve youth mental health services in that state, along with a separate $375 million civil penalty.
In March of this year, a jury in a separate case found Meta and YouTube negligent. The plaintiff in that matter, who began using the platforms at age 10, developed a severe dependency that was linked to anxiety, depression, self-harm, and body dysmorphic disorder. The court ordered the two companies to pay a combined $6 million in punitive and compensatory damages.
Social media platforms are also facing intensifying regulatory pressure on a global scale. Countries including Australia and Turkey have recently enacted legislation designed to restrict minors' access to social networking services.