Return to: https://forum.investmentwiki.org/t/analysis-of-the-impact-of-youth-related-trials-on-meta-platforms/547?u=aron
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Overview
- New Mexico jury for found Meta liable for deceiving teens about the platform’s safety and fined it $375 m, remedies will be decided in another trial.
- Jury found Meta liable in a California social media addiction case (KGM) and was fined $4.2 million ($2.1 m going to the plaintiff and the other $2.1 m being punitive payment).
- The K.G.M trial was the first among the more than 3,000 other social media addiction cases facing Meta Platforms.
- According to Zuckerberg, teens represent roughly 1% of Meta’s revenue ($2 billion based on 2025 total revenue).
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Prediction
- Aron: I will put the probability of Meta winning the appeals at 50% given that an appellate court decided Section 230 does not protect TikTok's algorithm and due to discrepancies in interpretation of Section 230 by the appellate courts.
- Aron: The penalty per violation per defendant is a maximum of $5,000. Assuming 1 million claims, the penalty could be not more than $5 billion.
- Aron: Probability of settlements is high given the toll that the lawsuits have on plaintiffs finances as well as the time it takes for the cases to be resolved.
- Aron: Based on Claude’s scenario model, the worst case if there will be structural changes is a revenue headwind of not more than $8 billion.
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Bullish arguments
- The Social Media Addiction Lawsuits is targeted on almost all social media platforms i.e. Meta Platforms, TikTok, Snapchat, e.t.c, which could make it hard to win given the plaintiffs are facing many defendants with significant resources: [The lawsuits allege that social media platforms (Meta Platforms, TikTok, Snapchat, etc) use sophisticated algorithms to maximize engagement in ways that may exploit the developing brains of children and teenagers.](https://curved-newsboy-c80.notion.site/The-lawsuits-allege-that-social-media-platforms-Meta-Platforms-TikTok-Snapchat-etc-use-sophisti-29c950cb73778088bc5dd850d5691cec)
- State of New Mexico prosecutor seems to only want changes in the safety tools (no grudge against Meta), signaling that settlement may be possible: It seems Torrez wants Meta to change its practices (no grudge against it): https://www.cnbc.com/video/2024/01/31/new-mexico-ag-on-meta-lawsuit-surprised-at-how-easy-it-was-for-predators-to-target-underage-users.html
- Meta could appeal the trial if it losses, leading to pressure from legal suit costs on the side of plaintiffs: [If Meta loses the trial, it can appeal the case within 30 days.](https://curved-newsboy-c80.notion.site/If-Meta-loses-the-trial-it-can-appeal-the-case-within-30-days-29c950cb737780fc8c46d1706ccf08a1)
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Bearish arguments
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Research on Meta’s youth-related lawsuits
- The Social Media Addiction Lawsuits
- The lawsuits allege that social media platforms (Meta Platforms, TikTok, Snapchat, etc) use sophisticated algorithms to maximize engagement in ways that may exploit the developing brains of children and teenagers.
- Superior Court Judge Carolyn Kuhl struck off some arguments based on Section 230 but allowed the other arguments to proceed. This is what happened in the New Mexico lawsuit as well.
- State of New Mexico v. Meta trial
- Third-party analysis of Meta Platforms safety tools
- Expert opinions
- Precedents
- Claude Opus 4:6: Between New Mexico youth trial and California youth trials against Meta, which one is stronger?
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