Meta Platforms (META) experienced a notable decline of over 4% on Friday, following significant fallout from a pivotal lawsuit judgement against the company. Earlier this week, a jury in Los Angeles determined that both Meta and Google’s parent company Alphabet (GOOG, GOOGL) were negligent in safeguarding young users on their platforms. This verdict catalysed a sharp drop in their respective stock prices, with Meta’s shares falling by as much as 8% on Thursday alone.
The lawsuit centred around allegations that the platforms were intentionally designed to keep young users engaged, despite knowing the potential dangers this posed to their mental health. This ruling could serve as a precedent for numerous similar lawsuits filed by parents, schools, and states against major social media companies.
Other social media networks also bore the brunt of Wall Street’s reaction, with shares of Reddit (RDDT) declining over 5% and Snap (SNAP) slipping by more than 3%. Alphabet’s shares fell by approximately 2% in the aftermath of the verdict.
In a response to the decision, a Meta spokesperson expressed their disagreement with the verdict, announcing plans to appeal. The spokesperson emphasised the complexity of teenage mental health, arguing that it cannot be attributed solely to a single application. Meta maintains confidence in its commitment to protecting young users online.
Similarly, José Castañeda, a representative for Google, stated that the ruling mischaracterises YouTube, asserting it is designed as a streaming platform rather than a social media service, and that the company also intends to appeal.
This case is not isolated. It follows a recent trial in New Mexico where Meta was found liable for allegedly misleading users about its product safety and putting children at risk. The jury in that case imposed a $375 million penalty on Meta.
Furthermore, Meta faces ongoing litigation from state attorneys general, reflecting arguments akin to those in the Los Angeles case, which further adds pressure on the company.
In summary, the ruling against Meta signifies a rising trend in legal accountability for social media companies concerning their impact on the youth, with potentially far-reaching implications for the industry as similar suits gain momentum. Meta’s response and the forthcoming appeals could play significant roles in shaping the future landscape of digital media regulations.
