Meta ordered to pay $567 million in New Mexico for teen mental health fund

A New Mexico state court on Thursday (6 August) ordered Meta to pay $567 million into a teen mental health fund and alter the operations of its platforms for young users, ruling that the company was responsible for harming children's well-being.

Judge Bryan Biedscheid in Santa Fe ruled that the tech giant created a public nuisance in New Mexico, siding with Democratic Attorney General Raúl Torrez. Torrez had accused the social media platform operator of designing products to addict young users and failing to protect minors from online sexual exploitation.

The judgment comes five months after a New Mexico jury, in an earlier phase of the trial, ordered Meta to pay $375 million upon finding it had violated consumer protection laws by misrepresenting the safety of Facebook and Instagram for minors.

The legal proceedings were closely watched amid a rising wave of litigation accusing major social media firms of causing harm to youth. While individual suits have been brought by children and families over personal injuries, states, municipalities and school districts have also filed legal actions seeking systemic reforms across the industry.

Over 40 states and more than 1,300 school districts have submitted public nuisance claims against social media platforms, demanding financial damages and court-enforced structural changes to products and operational practices.

Under a five-year decree issued on Thursday, Biedscheid instructed Meta to enforce youth-safety measures, including monthly usage limits for teens on Facebook and Instagram, notification restrictions, stricter limits on adult communications with minors, safeguards regarding AI chatbots, and enhanced review procedures for child sexual abuse reports.

Meta announced it will appeal the court decision, adding that it has been actively working to identify and eliminate harmful material from its platforms.

"We remain confident in our record of protecting teens online and will continue to defend ourselves against claims that misrepresent the facts," Meta said in an official statement.

Attorney General Torrez stated that Meta prioritized financial profit over child safety, highlighting that the judgment marks the first instance of a social media firm being compelled to adopt protective measures for children.

"This is not just a judgment against one company. It is a blueprint," Torrez noted, adding, "Now other states, and other countries confronting the same crisis, have a roadmap they can follow."

Investigative reports by Reuters last year uncovered internal corporate documents indicating Meta's AI chatbots could "engage a child in conversations that are romantic or sensual," forming part of broader inquiries into the company profiting from advertisements promoting fraud and illicit items.

In Thursday's ruling, Biedscheid mandated Meta to prevent minors in New Mexico from "engaging in romantic or sexualized interactions with Meta's artificial intelligence chatbots" and to bar adults in the state from using the chatbots to simulate or discuss sexualized interactions involving minors.

Public nuisance

Biedscheid heard three weeks of testimony without a jury during the lawsuit's second phase, which focused exclusively on whether Meta's services constituted a "public nuisance" under New Mexico law.

Historically, public nuisance claims addressed actions endangering public safety or health, such as blocking thoroughfares or polluting water bodies. However, government authorities have increasingly cited the doctrine in litigation concerning tobacco, opioids, vaping, climate change, and artificial intelligence.

"(J)ust as noxious pollution produced by the factory can harm the common public right to reasonably clean air, the harmful effects of Meta's platforms on children do not stay contained by its platforms and, instead, migrate to the internet as a whole and, perhaps most concerning, to the real world and create a common, societal burden on and harm to the affected children and their families and schools, as well as hospitals and law enforcement," Biedscheid wrote in his decision.

During the trial, Meta maintained that it could not have committed a public nuisance because it had not interfered with a recognized "public right," such as access to air or clean water. The tech firm further argued that its platforms were not the sole apps utilized by young residents, contending the case overlooked the impact of competing services.

Meta also contested the specific remedies requested by the state, describing many proposed measures in filings as "technologically impractical or completely impossible," warning they could compel the business to cease operations in the state entirely.

Furthermore, Meta argued that New Mexico's claims were pre-empted by Section 230 of the Communications Decency Act, a federal law granting online platforms immunity from legal liability regarding third-party content. Biedscheid rejected this defense, determining that the state was targeting Meta's internal product features rather than holding the firm liable as a publisher of third-party posts.

However, the judge declined to mandate certain remedies requested by New Mexico, ruling that altering Meta's core algorithms and functions such as infinite scroll and autoplay could infringe upon the firm's rights under the First Amendment of the US Constitution, harm its competitive posture, and conflict with Section 230.

The ruling comes as Meta prepares for trial next week in a federal court in Oakland, California, where 29 states allege the company engineered Facebook and Instagram to induce youth addiction and misrepresented product safety, exposing the firm to massive financial liabilities.

Additionally, the company is defending against a lawsuit filed by the state of Tennessee in a trial that commenced in July.

In disclosures to investors, Meta cautioned that legal and regulatory challenges in the US and the European Union concerning youth social media usage "could significantly impact our business and financial results."