Author | Hua Lin Wu Wang

In 1998, attorneys general from 46 states in the U.S. jointly sued the four major tobacco giants, ultimately settling for an astonishing $206 billion.

This lawsuit not only forced tobacco companies to pay hefty damages but fundamentally changed the operating rules of an industry—prohibiting advertising to minors, banning the promotion of cigarettes using cartoon characters, and mandating health warnings on product packaging. Since then, smoking rates in the U.S. have nearly halved.

Twenty-eight years later, the same script plays out with different protagonists.

On August 26 local time, Meta reached a settlement with attorneys general from all 52 U.S. states and territories, agreeing to pay up to approximately $18 billion and implement a series of mandatory product changes for Instagram and Facebook.

This is one of the largest civil settlements ever against a tech company and marks the first time the social media industry has been forced to make fundamental changes at the product level due to causing "addiction in children."

01 Meta's Early Surrender

The timing of this settlement is quite interesting; just a day before the announcement, Instagram head Adam Mosseri was testifying in court in Oakland, California, with Meta CEO Mark Zuckerberg also expected to appear in the following days.

This federal lawsuit, led by California, Colorado, New Jersey, and Kentucky, and joined by 29 states, just began on August 18.

The plaintiffs are seeking damages totaling up to $1.4 trillion, accusing Meta of deliberately designing features like infinite scrolling, algorithmic recommendations, and high-frequency push notifications to addict teenagers while knowingly concealing the dangers of the platform to minors' mental health and illegally collecting personal data from children under 13 in violation of the Child Online Privacy Protection Act (COPPA).

Meta's choice to settle on the 8th day of the trial indicates that it is acutely aware of the potentially catastrophic consequences of a jury verdict.

In fact, several rulings earlier this year already provided clear signals. In March, a jury in New Mexico found that Meta violated the state's Unfair Trade Practices Act, imposing a $375 million fine. On August 6, the same case's judge further ruled that Meta created a "public nuisance," adding another $567 million in damages and mandating youth protection measures. Similarly, in March, a jury in Los Angeles held Meta and Google accountable for a girl's depression and anxiety in a lawsuit concerning individual plaintiffs, awarding a total of $6 million.

One unfavorable ruling after another made Meta realize that the risks of continuing the fight far outweighed the benefits of settling.

The product rules after social media will be tightly restricted | Image Source: Medium

The amount structure of the $18 billion settlement is quite complex, resulting in different figures reported by various media.

Overall, Meta will pay up to approximately $18 billion in installments over the next 10 years.

Of this, about $12.7 billion will go to the "participating states," accounting for 70% of the total, for projects related to youth online safety, crisis intervention services, after-school activities, and mental health programs. California alone is expected to receive between $1.5 billion and $2.1 billion. In addition, the settlement also resolves privacy lawsuits against the Cambridge Analytica scandal brought by California, Illinois, New Mexico, and Washington D.C., amounting to about $459 million.

While $18 billion is a large number, it is not fatal for Meta's size. Meta is projected to have over $101 billion in revenue for 2025, and its revenue for the second quarter of this year is already at $60.8 billion. Meta has stated it will set aside about $10 billion in legal fees in the third quarter of 2026, with the remaining portion spread over the next nine years.

After the settlement announcement, Meta's stock price rose about 4.4% in pre-market trading.

The market's reaction is clear—spending money to mitigate disaster, the shoe finally drops, it's a positive outcome.

But the money is not the real issue.

02 Putting "Constraints" on Social Media

The most important aspect of the settlement agreement is a series of mandatory product changes. These are not voluntary feature updates from Meta; they are hard requirements written into legal documents, overseen by independent auditors, with a validity period of up to 10 years.

Specifically, they include:

Time Limits. Users aged 13 to 17 will have their daily usage time on Facebook and Instagram strictly limited to 2 hours, calculated as a total for both applications. Only parents can modify this limit. The system must pop up a reminder after every 15 minutes of continuous use, urging users to take a break.

Nighttime Blocking. Underage users will be unable to access the applications between midnight and 6 AM by default. Similarly, only parents can lift this restriction.

Class Time Mute. During school hours from 8 AM to 3 PM, the system will limit push notifications to underage users.

Hide Social Comparisons. Underage users will not see the like counts or other interaction data on posts by default. Extreme beautification filters will also be blocked.

Non-Algorithm Options. Teenagers will be able to choose a non-algorithm-driven news feed as the default browsing method.

Tighter Age Verification. Meta must strengthen technical measures to identify underage users who falsely report their age, detect users under 18, and remove accounts of children under 13. Private accounts will be enabled by default to restrict contact between suspicious adults and underage users.

Quick Response. 90% of reports from teenage users must be addressed within 6 hours.

Independent Auditing. An independent auditor will be appointed with extensive access to Meta's systems to monitor compliance for at least 5 years.

These terms combined mean that the core growth engines of social products—algorithm recommendations, infinite scrolling, push notifications, and social comparison—will be systematically dismantled or restricted when aimed at minors.

03 Must Bring "Shields" Along

The most cunning design in Meta's settlement lies in the remaining 30% of the compensation.

The settlement agreement stipulates that Meta will first pay about $12.7 billion (70%) to the participating states. The remaining approximately $5.3 billion (30%) is contingent on one condition—whether YouTube and TikTok also agree to implement similar restrictions and each pay about $5 billion.

In other words, Meta has legally bound its competitors within the settlement agreement.

Because if only Meta restricts teenagers' usage time, the result will only be users migrating to TikTok and YouTube. Meta's chief legal officer C.J. Mahoney stated plainly in a statement: "Teenagers seamlessly switch between dozens of applications daily. To achieve real progress, we need an industry-level solution."

Meta even published an open letter on the day of the settlement, directly urging TikTok and YouTube to join this framework. The wording in the letter is interesting—it no longer sounds like a defendant defending itself but rather like a rule-maker pressuring peers in the industry.

If YouTube and TikTok refuse to follow suit, Meta saves $5.3 billion while publicly blaming competitors for not protecting children. If they do comply, the whole industry is restricted together, ensuring at least a fair competitive environment. In either scenario, Meta does not lose.

It is also worth noting that just three days before the Meta settlement, TikTok and ByteDance had reached a $400 million settlement with the U.S. Department of Justice, concluding a children’s privacy lawsuit that began during the Biden administration.

$400 million versus $18 billion—the disparity highlights that, in the eyes of U.S. regulators, "addictive design" and "data violations" are entirely different magnitudes of issues. And Meta's settlement terms are pushing this higher standard onto the whole industry.

04 Social Media's "Tobacco Moment"

The tobacco settlement of 1998 amounted to $206 billion (approximately $410 billion in today's purchasing power), far exceeding Meta's $18 billion. But more critically, that settlement transformed a whole generation's relationship with tobacco—not because fines bankrupted tobacco companies (they continue to thrive), but because the subsequent advertising bans, public smoking prohibitions, and health warnings fundamentally altered societal perceptions of smoking behavior.

Meta's settlement is following the same path.

Comparing social media's algorithm design to industrial pollution and addiction to information flows to nicotine dependency—once this legal framework is accepted by courts and legislators, the subsequent impact will be chain-like.

The New Mexico court has already characterized Meta's actions using the legal concept of "public nuisance," which was initially used to address factory emissions. When "algorithmic recommendations" and "chemical wastewater" are legally discussed within the same framework, the legal risks for the entire industry are repriced.

Currently, there are nearly 2,900 pending cases in the multidistrict litigation (MDL 3047) in the Northern District of California Federal Court, with defendants including not only Meta, but also TikTok, Snap, and YouTube. The Indiana Attorney General has already stated in a declaration that the next step will be to seek "similar protective measures" against Discord, Roblox, Snapchat, TikTok, and YouTube.

For Chinese companies looking to expand overseas, this signal couldn't be clearer.

ByteDance's TikTok in the U.S. is already facing the same legal pressures as Meta, and the clause in the Meta settlement agreement that drags TikTok into the framework feels more like a "name and shame" notice. As attorneys general from all 52 states in America have formed a bipartisan consensus on "social media addicting children," any social product operating in the U.S. cannot escape.

After 1998, no one dared to publicly claim that "smoking is harmless to youths."

After 2026, it is likely that no social platform will dare to say "our algorithms won't addict children." The difference is that tobacco companies took decades to reach that point, while social media has accomplished it in less than a decade.

Years from now, people may look back on this time and jokingly say, "It was crazy back then; they actually let children use social media!" This absurd fact might be another "necessary winding path" humanity must take.