Kathmandu— Social media company Meta is currently defending itself against a lawsuit brought by 29 state attorneys general who accuse Facebook and Instagram of intentionally designing their platforms to be addictive, particularly for younger users. Opening statements began Tuesday in US federal court, with plaintiffs alleging that Meta knew its platforms could fuel harmful behavior while also collecting data on minors. The case, expected to last six weeks, could result in fines reaching as high as $200 billion and potentially force fundamental changes to how Facebook and Instagram operate.

Financial Stakes and Potential Penalties

The potential financial impact for Meta is substantial, with state penalties possibly reaching $1.4 trillion according to the company’s own estimates – though states have indicated they are seeking $200 billion in damages. This figure roughly matches Meta's revenue from 2023, which totaled nearly $201 billion, and its operating income of $83.2 billion. While a penalty of this magnitude is unprecedented, Meta has already faced significant fines recently, including $375 million in a New Mexico lawsuit in March and another $567 million ordered earlier this month. Financial services firm Morningstar suggests that algorithmic changes imposed by legislation are manageable given the company’s largely adult user base.

Beyond Finances: Core Product at Risk

A legal requirement to alter the fundamental mechanics of Instagram and Facebook could prove more challenging for Meta than financial penalties. The lawsuit seeks to eliminate features like infinite scrolling, which drives ad impressions – a key component of Meta’s advertising revenue. The company acknowledges in SEC filings that its financial performance is heavily reliant on adding, retaining, and engaging users who view these ads. Plaintiffs also want the court to compel Meta to remove algorithms built from data collected from minors and prioritize user wellbeing, including implementing time restrictions for young consumers. While Meta has introduced features like time-use reminders and ad management tools for teens, the lawsuit alleges these measures are easily dismissed.

Ripple Effect of Litigation

Meta is currently facing lawsuits from over 100,000 parties, encompassing individuals, cities, states, and school districts. Legal experts predict this initial case will set a precedent for future litigation against other social media companies like Snap, TikTok, and YouTube, which have also faced allegations of designing platforms to encourage compulsive use by young people. Aleksandar Tomic, associate dean at Boston College, likened the situation to tobacco litigation in the late 1990s, suggesting that successful claims against Meta could open the floodgates for similar lawsuits across the industry.

Company Faces Broader Challenges

The lawsuit comes as Meta navigates other financial pressures. Its Reality Labs division, focused on virtual and augmented reality including the metaverse, has lost $70 billion since 2020. The company is also increasing spending on AI infrastructure amid concerns about a potential AI bubble. Cash flow decreased significantly in the first half of 2024, falling from $12 billion to $784 million. Meta itself acknowledges in SEC filings that defending lawsuits is costly and burdens its management and employees.

The outcome of this landmark case remains uncertain, but it is expected to have far-reaching implications for Meta’s future operations and the broader social media landscape.

(With inputs from Al Jazeera)

Originally published on abcnews.com.np.