Meta ordered to pay US$25B after jury says it misled consumers on privacy

A judge in New Mexico ordered Meta Platforms to pay US$25 billion on Wednesday after a jury found the company had misled consumers in a case arising from allegations that a political consulting firm involved in Donald Trump’s 2016 presidential campaign obtained data from ‌millions of Facebook users without their consent.

New Mexico Attorney General Raúl Torrez said it was one of the largest, if not the largest, single state verdict against the company in American history.

“Facebook’s wrongdoing — over the course of years and systematically broadcast to the public — goes to the heart of Facebook’s core business practices,” Judge Francis Mathew wrote in his order following the verdict.

Mathew found that a penalty of more than US$219 billion was warranted, based on state law, but he reduced the figure to US$25 billion.

In a statement, C.J. Mahoney, Meta’s chief legal officer, said the company is confident it will win on appeal.

“This ruling, and the Attorney General’s approach to this enforcement, makes it all but impossible to do business in the state of New Mexico,” Mahoney said. “At its core, this lawsuit seeks to impose a tax on speech to enforce new rules for what people can say online.”

The company had previously said a penalty in the billions of dollars risked violating its constitutional rights to due process and protection from excessive fines.

The penalty is the largest levied against the tech giant in the wake of the Cambridge Analytica scandal. In 2019, the company was hit with a US$5 billion penalty by the US Federal Trade Commission stemming from the same scandal.

Six other states settled their lawsuits related to Cambridge Analytica for US$459.2 million as part of a US$17.1 billion multistate settlement Meta reached in August to resolve states’ claims that the company’s platforms had harmed teen mental health.

New Mexico’s attorney general had sued Meta in 2021 following revelations that Cambridge Analytica had harvested personal data from as many as 87 million Facebook users through a third-party app.

The state accused Meta of lying to Facebook users in New Mexico about who had access to their data, how the company handles hate speech and misinformation posted on the platform and other internal policies. The company knew that third parties had broad access to users’ personal data, and it tolerated hate speech or other harmful content when it benefited the company’s bottom line, the state said.

Cambridge Analytica, now defunct, worked for Trump’s successful presidential campaign in 2016, and gained access to the personal information from millions of Facebook accounts for the purposes of voter profiling and targeting. It obtained that information without users’ consent from a researcher who had been allowed by Facebook to deploy an app on its social media network.

“It has been a long time coming holding Big Tech accountable,” Torrez told a press conference in Albuquerque after Wednesday’s ruling. “I think today’s judgment is a clear break with that past and a very clear warning to those in this space and beyond that we intend to protect our people and protect our consumers.”

Analyst Gil Luria, head of technology research at D.A. Davidson & Co, called the ruling costly but unlikely to impact the company’s value.

“Meta is worth nearly two trillion dollars and will likely continue to appeal these cases and drag them out,” Luria said.

Legal experts and financial analysts said the penalty was likely to face a lengthy battle on appeal.

Jurors on Sept. 25 found that 26 of 29 statements made by the company and its leadership on those issues were misleading. They said the company had committed more than 43 million violations of New Mexico’s consumer protection laws, based on the number of Facebook users or New Mexico residents who were the audience for each misleading statement.

State law allows a penalty of up to US$5,000 per violation and directs that all of the money go to New Mexico’s school system, Torrez told reporters after the verdict. At a hearing on Oct. 1, Randi McGinn, a lawyer for New Mexico, had asked Mathew to award the state between US$35 billion and US$40 billion, saying that would be supported by the US Constitution’s protections on due process and the jury’s verdict.

“This court should speak to Meta in the only language it understands, which is money, and the value of its stock price,” McGinn said.

In court filings, Meta urged Mathew to cap the penalties at US$3.45 billion, saying a higher penalty ran the risk of scaring businesses out of the state. The evidence showed that Meta does not sell user data and New Mexico did not prove that any consumer had actually been misled, the company said in court filings.

Daryl Lim, an associate dean at Penn State Dickinson Law, said that while the US Constitution generally protects against excessive fines, because of the way New Mexico law is written, the large size of the penalty does not automatically mean it could be overturned.

The verdict was the second in six months by a Santa Fe jury in a lawsuit brought by the state of New Mexico against Meta Platforms.

In the first trial, which ended in March, a Santa Fe jury ​found Meta misled users ⁠about young users’ safety on its Facebook, Instagram and WhatsApp platforms and ordered the company to pay US$375 million in civil penalties. After a second phase of that trial, a judge directed the company to pay US$567 million into a New Mexico fund for teen mental health and ordered Meta to implement measures to protect teen Facebook and Instagram users in New Mexico.