Meta battle with California AG could have ‘astronomical’ consequences

If New Mexico created the blueprint for taking on Meta, California could determine the company’s fate when it comes to critical changes at Facebook and Instagram.

Opening arguments begin Tuesday in the trial that California Attorney General Rob Bonta is co-leading against Meta, following a litany of allegations that the company fostered addictive behavior in teens and children. The jury was seated last week in Oakland’s federal courthouse.

The trial involves a coalition of 29 state attorneys general in a unified case against Meta that was brought in 2023, and will be argued by lawyers representing California, Colorado, New Jersey and Kentucky. The stakes are enormous as leading government officials across the country push for Meta to be held accountable for allegedly violating federal and state laws, including the Children’s Online Privacy Protection Act, or COPPA, and various consumer protection statutes.

Industry experts are calling it social media’s “Big Tobacco” moment, with Meta as the centerpiece. In the 1990s, tobacco companies were forced to pay billions of dollars for misleading the public about the safety and potential harms of their products, and subsequently saw their power and influence dramatically diminished.

Earlier this month, Meta lost a case in New Mexico that will require the company to make some changes to its services and pay nearly $1 billion. But California carries such power and influence that a bad result in Meta’s home state could lead to much steeper penalties, including a broader overhaul that forces fundamental alterations to key algorithms.

“California matters more than any other jurisdiction in the U.S.,” said Julia Powles, executive director of the UCLA Institute for Technology, Law and Policy. “It’s where they are subject to the greatest legal reach, and it’s a jurisdiction watched around the world.”

New Mexico AG Raúl Torrez, fresh off his court victory, told CNBC that the consequences could be “astronomical” for a company that gets 98% of its revenue from online advertising. Meta CEO Mark Zuckerberg is relying on the cash generated by the company’s dominant ad business to fund his massive bet on artificial intelligence, which could cost as much as $145 billion this year.

The judge in New Mexico ordered Meta to pay $567 million into an abatement fund as part of a second phase of a case involving child sexual exploitation allegations. A jury there ruled in March, during the trial’s first phase, that Meta must pay $375 million for violating the state’s unfair practices act. Meta said it disagreed with the New Mexico ruling and plans to appeal.

Torrez called it a “pretty substantial judgment,” but was quick to note how it pales in comparison to what could be coming.

“This is a state with some 2 million people,” Torrez…