The "Big Tobacco Moment" of social media has arrived: Meta (META.US) lost the lawsuit in New Mexico and was ordered to pay a compensation fund of $567 million.

Meta (META.US) has been ordered to pay $567 million to a compensation fund in New Mexico as part of a public nuisance case and one of many lawsuits the company faces over claims that its applications have caused harm. This fund is in addition to a $375 million civil penalty imposed on Meta earlier this year for violating New Mexicos unfair practices act. The second phase of the trial began in May to determine whether Metas actions constitute public nuisance, which could lead to the need for product reforms. Judge Bryan Biedscheid wrote in Thursday's ruling, "While Meta is not the only company with this issue, the weight of the evidence in this case indicates that its social media platform is a significant contributing factor to the current mental health crisis among New Mexicos youth." The majority of the fund$420 millionwill be dedicated specifically to treating individuals harmed by the platform. The remaining funds will be utilized for raising awareness and prevention, screening and assessments, referrals and coordination, as well as implementation, quality improvement, and evaluation. For Meta and its peers, this case is one of several this year described as social medias "Big Tobacco" moment. In the 1990s, tobacco companies were ordered to pay billions for misleading the public about product safety and potential harms, leading to a sharp decline in their power and influence. Meta noted in its second quarter financial filings that "the New Mexico Attorney General has stated that they intend to seek fines as high as $63.85 billion in this case." The court must weigh multiple factors to determine whether Meta's platform has caused a public nuisance in New Mexico, as claimed by the plaintiffs. Cases involving public nuisance claims typically revolve around the physical world rather than the internet, placing the burden on plaintiffs to establish a connection between the states harms and Metas applications. Biedscheid referenced testimonies from several professionals in fields like healthcare during the trial. He pointed out the state's lack of sufficient mental health programs and services to assist teenagers harmed by social media applications. Causation The ruling stated, "Expert testimonies support a causal relationship between social media and the mental health crisis among youth in New Mexico." New Mexico Attorney General Ral Torres said in a statement, "This ruling holds the company accountable for the harm it has caused to our children, families, and schools, and forces Meta to make real changes in how it operates in New Mexico." A spokesperson for Meta stated in a statement that the company disagrees with the ruling and plans to appeal. The spokesperson said, "We strive to ensure that people are safe on our platform, and we have been transparent about the challenges in identifying and removing bad actors and harmful content. We are confident in our record of protecting youth online and will continue to defend ourselves against those claims that distort the facts." Torres sued Meta in 2023, after conducting an undercover operation that created a fake social media profile of a 13-year-old girl. He previously told the media that the account "was inundated with images of child abusers and targeted harassment." During a press conference before the start of the second phase of the trial, the Attorney General stated that as part of the case, Torres aims to compel Meta to thoroughly reform its applications, including implementing effective age verification technologies, modifying recommendation algorithms that do not harm children's welfare, and making other changes to "fundamentally restructure the business model that Meta is allowed to operate under in the state." In addition to the compensation fund, Thursday's order also requires Meta to continue using AI to "improve age assurance models and tools in New Mexico" and attempt to "develop a dedicated age prediction model for those under 13 within two years." Other remedies include streamlining the process for reporting underage use and "creating a reporting portal in collaboration with schools or child safety organizations, where school administrators can flag any suspected accounts of users under the age of 13 on social media platforms." However, Meta was not mandated to make any changes to its algorithms, as Biedscheid noted that doing so might conflict with the protections under Section 230 of the Communications Decency Act and the First Amendment. The judge added that Meta will not be required to stop supporting end-to-end encryption on Facebook. The judge pointed out that Meta's WhatsApp is "not a cause of the public nuisance that needs to be eliminated, as the platform does not recommend predators and harmful content to teenagers."