In 1994, more than 40 US states came together to sue one of the most powerful industries on Earth: big tobacco.
The suits brought together diverse claims centred on tobacco companies’ misleading advertising and contribution to a mounting public health crisis. They ended in a negotiated settlement with the US government, in which the companies agreed to pay more than any industry ever, and the states agreed to drop a large portion of their claims.
Thirty years later, smoking is on the rise in the developing world, the companies involved remain profitable and the global tobacco market is worth nearly $1tn.
On Tuesday a major trial against Meta began, in which 29 states have brought the claim that the parent of Facebook and Instagram designed a deliberately addictive product and targeted it at children.
That trial follows a bellwether case earlier this year, in which a Los Angeles jury found the social media company – and YouTube, its co-defendant – liable for deliberately designing an addictive product that had deleterious effects on the mental health of a single young claimant.
That case, which awarded the claimant $6m, opened the door for this and other litigation. At about the same time, Meta was forced to pay a total of $942m in a separate trial in New Mexico. The New Mexico case focused on whether the company was aware of – and took measures to prevent – child sexual exploitation on its platforms.
This next wave of litigation will focus less on child exploitation, and more on the fundamental design of Meta’s platform: the algorithm that underlies which content it shows to users and how. So, how far could the litigation go?
Kate Winick, an analyst at Forrester, said the trial was “potentially the end of social media as we know it” and, while a ruling against Meta would not permanently kill the industry, it could “significantly reduce usage over the long term”.
The figures that Meta and other social media companies could stand to pay are immense. The attorneys general are seeking $200bn in damages, the amount of revenue the company takes in a year. Meta has said in a court filing that they could amount to $1.4tn, which is just short of the company’s market capitalisation. The judge in the case has called the company’s estimation “unreasonable”.
Perhaps a more realistic risk for the company is the potential for permanent changes to the way its social networks operate, which are the engine for its entire business. Meta is essentially a digital advertising company. Its recommender algorithm ranks posts in users’ feeds and fuels engagement in part by showing people posts that are likely to inflame emotion and keep them hooked.
It is this algorithm that American attorneys general seem interested in changing, because it is this “dopamine-manipulating” feature – in the words of the AGs’ lawsuit – that makes social media addictive. Changes to this algorithm may not alter how Facebook advertises, said Steven Murdoch, a professor at University College London. But it could reduce engagement, which could gravely reduce its opportunity to advertise to users.
But all this depends on how big of a swing a US jury – and US regulators – are willing to take at the platform. Discontent is brewing worldwide about Meta and its business; the EU also wants the company to modify its “addictive design”.
“There’s a plausible path” for global changes to the algorithm, said Murdoch. “But whether it’s devastating or not – I’m not convinced the things that are plausibly going to be asked for are going to be devastating for the company.”
Take the recent case of Google. US regulators sued the search company in 2023 in a landmark antitrust case – which could have ended with authorities breaking up the company, perhaps forcing it to sell Chrome, the most popular web browser in the world. Google lost the case but that extreme penalty wasn’t imposed. Despite finding that the company had engaged in monopolistic practices, it got away with what critics called a “slap on the wrist” and remains a juggernaut.
“I don’t think anyone really wants to destroy Facebook. It’s a valuable company and there would be so many bad outcomes,” said Murdoch.
A Meta spokesperson said: “The state AGs may call this a landmark case but their limited claims are unsubstantiated and their financial demands are vastly disproportionate.
“Rather than sticking to the facts or the law, the states have instead decided to chase an outlandish payout. We stand by our record of creating strong protections for teens, and look forward to making our case in court.”
Or take the case of big tobacco. The US government sought $289bn from major tobacco companies – including Philip Morris – in one of its landmark cases, which was prosecuted under a US anti-racketeering statute. Philip Morris and its co-defendants lost the case.
But in the course of proceedings, the government’s original monetary demand was modified to less than 5% of the original amount – $14bn, to be paid over 10 years. Philip Morris continued doing business, although it and other tobacco companies were forced to put out statements about the harms of smoking, and change how they marketed their products in the US.
Thirty years later, although smoking continues its long-term decline in the developed world, Philip Morris’s revenues are at roughly $40bn a year – less than they were 20 years ago, but not by much. They have been steadily increasing for the past four years.
