For decades, tech giants grew at breakneck speeds as Congress struggled to keep pace with the consequences of the companies’ rapidly booming businesses.
But a new de facto regulatory regime has emerged over the past year as courts clobber the biggest internet companies. And for the first time, their product designs and their advertising models — which critics say treat users like products — are costing the companies serious money.
The latest blow came on Wednesday, when a New Mexico judge ordered Meta, which owns Facebook, Instagram and WhatsApp, to pay a record $25 billion penalty for abusing consumer privacy. In a 20-page ruling, the judge scolded the company for deceiving consumers and allowing their data to be harvested by the political consulting firm Cambridge Analytica.
“Facebook’s misrepresentations about users’ control of their data were not isolated incidents, but rather a systematic pattern of deception at the core of Facebook’s business model,” wrote Judge Francis J. Mathew of the State District Court in Santa Fe.
The decision, and others like it, amount to a comeuppance for tech behemoths, whose fortunes have been built on the business model of winning the attention — and data — of users. Now, trials and court decisions have laid bare many of the allegations over deceptive and harmful business practices that critics have said long propelled the companies’ growth.
New consumer guardrails are emerging through the courts’ record financial penalties and order of changes to designs of the companies’ technologies, legal experts said.
“We’re witnessing an inflection point in the regulation of social media,” said Nora Engstrom, a professor of law at Stanford. “Courts, not Congress, are promoting accountability and forcing concrete change.”
The changes stem from thousands of lawsuits filed against Meta, Google, Apple, Amazon, TikTok and others by individuals, schools, and state and federal officials. Their claims include that the internet giants harmed consumers by creating addictive platforms, abusing their power through their collection of valuable data and deceiving users.
For years, the tech industry successfully fought off many threats by invoking a legal shield known as Section 230 of the Communications Decency Act of 1996. The law protects the companies from liability for the content posted on their platforms. The companies have also said that there is plenty of competition, and that they have benefited consumers with free services like search and social media connections.
The arguments have long worked to deter new laws. But courts have recently decided differently.
“The harm in this matter is difficult to overstate,” Judge Mathew said in his ruling Wednesday. “It relates to the way in which Facebook induces people onto the platform and ultimately keeps them there,” he said, “which in turn is what has allowed Facebook to become as profitable as it is.”
The legal backlash was nearly a decade in the making.
In March 2018, concerns over data privacy boiled over with revelations that Cambridge Analytica, which was based in Britain, obtained large tranches of data on U.S. Facebook users without their consent. Employees said the data was used to sway voters during the 2016 presidential election.
Mark Zuckerberg, who founded Facebook in 2004, was called to testify on Capitol Hill in two days of marathon hearings on privacy abuses related to the scandal. But Congress did not pass any related legislation.
Executives from Meta, Amazon, Google and others were also called to testify in Congress about how their products and monopolistic power abuses over the years have caused potential harms. Again, there was little effect.
But then the courts slowly rolled into motion. Federal regulators and states filed lawsuits challenging the companies’ dominance, business practices and actions that have caused harm to children. Parents and teens challenged the companies under claims of personal liability. And school districts filed lawsuits over shouldering costs for mental health services linked to social media use.
Starting in 2024, courts ruled twice against Google in federal antitrust lawsuits, declaring the company a monopolist in search, then advertising technology. Judges issued court-ordered fixes, although critics said they were weak. Meta avoided a similar fate in an antitrust trial, but Amazon and Apple still face upcoming federal cases.
For the state and user lawsuits — primarily targeting social media — personal injury and consumer protection laws appeared a long shot. The products are not physical like a defective baby crib.
But in March, a Los Angeles jury ordered Meta and YouTube to pay a young woman known as K.G.M. $6 million for personal injuries related to years of mental health problems she said derived from the addictive designs of Instagram, Facebook and YouTube.
The watershed decision was followed in August by the New Mexico judge’s order for Meta to pay $942 million in penalties for harming youths with addictive design features, which were violations of state consumer protection laws.
Then last month, attorneys generals for 47 states, the District of Columbia and United States territories struck a $17.1 billion settlement with Meta that forced time and other limits for young users to curb addiction to Instagram and Facebook. As part of the agreement, Meta paid nearly all of the states $459.3 million to resolve outstanding state privacy claims from the Cambridge Analytica scandal.
“There is now a sense of accountability and a public reckoning of social media,” said Phil Weiser, the attorney general of Colorado, who co-led that settlement.
In all of the social media trials this year, the companies faced a jury, highlighting the public anger against tech. And the cases relied on mountains of internal documents showing Meta executives, including Mr. Zuckerberg, and YouTube leaders openly discussing how design decisions like infinite scroll, video auto-play and beauty filters increased use by young users.
In the New Mexico data privacy trial last month, lawyers argued that the company misled the public about the privacy of their platforms and presented email conversations involving Mr. Zuckerberg and Sheryl Sandberg, then Meta’s chief operating officer.
The jurors ultimately found that 26 of the 29 statements made by Meta and its executives were unfair or deceptive.It is unclear if the court decisions will have a lasting effect. The companies have vowed to appeal. The decisions come years after the allegations of harm. And the financial penalties are fractions of the companies’ valuations — still some of the most valuable in the world.
But the losses could be a chink in the armor of the companies, legal experts said. And more trials lie ahead.
“Congress has held hearing after hearing and have done nothing,” said Tim Wu, a law professor at Columbia University who has written for The New York Times. “But it turns out you can use old law — ancient laws — to catch up to the social media companies if you are willing to challenge them.”
The post How a Legal Backlash Against Big Tech Is Forcing Big Changes appeared first on New York Times.
