Meta must pay $25 billion to New Mexico after a jury found the tech giant guilty of nearly 44 million violations of state consumer protection laws.
The largest fine to ever hit Meta came after New Mexico Attorney General Raúl Torrez declined to join an $18 billion settlement Meta reached earlier this year with attorneys general in nearly all states.
In his opinion Wednesday, US district court judge Francis J. Mathew said there was no “bright line rule” for determining the appropriate penalty for Meta’s repeated and willful deception of users since 2010 about their “control of data, third-party data misuse, misinformation, hate speech, and equal enforcement.”
New Mexico had asked the court to impose even higher fines, up to $40 billion. The entire state of 2 million people were harmed by Meta’s conduct, Torrez argued, and it seemed dubious that Meta would make meaningful changes unless the penalty impacted Meta’s stock price.
Mathew found that the trial record—which showed that top leadership, including Mark Zuckerberg, were aware that the company, then known as Facebook, was making misleading public representations—supported “the highest level of penalty allowed by the NW Unfair Practices Act.”
“The jury was unequivocal: Facebook systematically misled the public” and “took advantage of the public’s lack of knowledge respecting Facebook’s practices to a grossly unfair degree,” Mathew wrote.
To Mathew, it seemed that Meta made a choice to avoid transparency with users in a bid to capitalize on data they didn’t realize they were sharing and better compete with one of its main rivals, the platform then known as Twitter.
“The violations the jury found were not the product of a single misleading statement or isolated incident,” Mathew noted. “They arose from repeated public representations over more than 11 years, concerning multiple core aspects of Facebook’s platform and business.”
Meta had hoped that New Mexico’s penalty would be more in line with a$5 billion settlement the company made with the Federal Trade Commission to address the Cambridge Analytica fallout. At most, they expected to pay $3.4 billion, while arguing that anything more would be “unconstitutional,” AP News reported.
But Mathew said that the FTC settlement “cannot be viewed in a vacuum” while noting that so far, “penalties, consent agreements, and decrees have not deterred Meta from using deceptive trade practices” since the Cambridge Analytica scandal was first exposed.
“To induce users to provide their personal information to Facebook, Facebook made many false promises respecting the security and control of that data over the course of more than a decade,” Mathew wrote.
Meta will appeal
In a press release, Torrez celebrated the ruling, calling it “a historic day for New Mexico and for consumers across the country.”
“For too long, powerful technology companies have operated as though their size and influence put them beyond the reach of the law,” Torrez said. “A New Mexico jury found nearly 44 million violations of our consumer protection statute, and this penalty order demonstrates that those violations carry real consequences. We took on one of the largest companies in the world because New Mexicans deserve honesty, accountability, and the protection of their personal information. Today’s result makes clear that no corporation is too powerful to be held accountable.”
A Meta spokesperson confirmed to Ars that the company plans to appeal. Legal experts told Reuters the company has a decent chance at slashing the fine on appeal based on constitutional claims. On top of likely claiming that the penalty is unconstitutional, Meta also feels that “this ruling, and the Attorney General’s approach to enforcement, makes it all but impossible to do business in the state of New Mexico,” the spokesperson said.
The eye-popping fine following the multistate settlement appears to be making the company uncomfortable, despite critics claims that New Mexico’s penalty is just a “drop in the bucket” for a company that makes $200 billion annually. On Thursday, the Verge highlighted Meta’s third-quarter earnings report, which showed the company paid close to $10 billion for the multistate settlement. Without that expense, Meta’s income from operations would have been $22 billion higher, the report said.
The excessive penalties come as Meta attempts to reboot its struggling AI strategy, and Meta appeared to signal to Donald Trump’s administration to possibly support its appeal by nodding to its AI wing in its statement opposing the ruling.
“At its core, this lawsuit seeks to impose a tax on speech to enforce new rules for what people can say online,” Meta’s spokesperson said. “We are confident we will prevail on appeal. In the meantime, Meta will continue to build a safe and free platform to connect millions of Americans, grow small businesses, and help the country maintain its competitive edge.”
AGs warned to keep watch on Meta AI
Nidhi Hegde, executive director of a watchdog nonprofit called the American Economic Liberties Project, told AP News that Meta users want more enforcers willing to take the company to trial rather than settle matters in ways that the FTC settlement suggested weren’t genuine.
In his opinion, Mathew noted that the jury found that Meta internal messages and investigation results showed that “rather than seek to educate Facebook’s users… Zuckerberg chose instead to capitalize on that lack of understanding in order to manipulate users into sharing more of their personal information publicly.” In one message, Zuckerberg was found laying out a plan to deceive users, saying, “Give them a chance to change their privacy settings but obviously don’t encourage it.”
The company also failed to notify users when apps misused their data, only flagging two of 2,000 unique apps associated with data misuse, Mathew said. Following its investigation, Meta’s “decision was deliberately made to narrow Facebook’s internal definition of data misuse so that Facebook would not have to notify as many people due to the operational burden of doing so,” he wrote.
Additionally, Facebook continued knowingly profiting off of pages with misinformation and hate speech, Mathew wrote. Internal research found “substantial amounts of misleading, false, and possibly false political, health, and science content,” with Meta documenting a “greater concentration of false content in top performing advertising content than in top performing Facebook content.”
Rather than share that research, Meta buried it, while also deceiving users in dozens of other ways, including by misrepresenting that the average Facebook users gets “equal treatment” to celebrities and influencers. While Meta claimed everyone was treated the same, one class of users received warning to remove violating content before strikes were applied and frequently got harmful or sketchy content decisions overturned in cases where most users would not.
Hegde told AP News that she thinks as Meta and other company’s AI products grow more popular, it will be increasingly important for states to remain watchful and protect residents from unknown harms.
“Right now, they are rolling out Muse, an AI assistant encouraging people to trust it with everything from their bank accounts to their medical information,” Hegde said. “Which is why we need more enforcers with courage and laws with actual teeth to rein them in.”
Torrez vowed to keep watch in New Mexico and to continue using the blueprint from the Meta case to enforce consumer protection laws and prevent tech giants’ misuse of data.
“This case has always been about more than one company or one scandal,” Torrez said. “It is about whether corporations can mislead consumers about what happens to their personal information without facing meaningful consequences. New Mexico stood its ground, took this case to trial, and secured a verdict establishing millions of violations of our law. This outcome reinforces a fundamental principle, companies that do business in our state must follow our laws and respect the rights of our people.”
Ashley BelangerSenior Policy Reporter
Ashley BelangerSenior Policy Reporter
Ashley is a senior policy reporter for Ars Technica, dedicated to tracking social impacts of emerging policies and new technologies. She is a Chicago-based journalist with 20 years of experience.
Source: arstechnica.com
