Meta Oakland Federal Court opens hearing: 29 states accuse the platform of harming minors, stock price drops by about 4.5%

The federal court in Oakland, California, began hearings on Tuesday. California, Colorado, Kentucky, and New Jersey, representing a bipartisan coalition of attorneys general from 29 states, are suing Meta: accusing the company of designing Facebook and Instagram to be addictive for children and teenagers, while knowing that it could exacerbate anxiety, depression, and eating disorders, yet downplaying the risks; and violating the Children's Online Privacy Protection Act (COPPA) of 1998 by collecting information from users under 13 without adequately fulfilling notification and guardian consent requirements. The presiding judge is Chief Judge Yvonne Gonzalez Rogers of the Northern District of California. The eight-member jury will only provide advisory opinions, with liability and relief determined by the judge. The trial is expected to last six to eight weeks. Meta's stock price fell 4.45%, closing at $543.67, down about 17% for the year. On the same day, Pinterest and Snap rose, suggesting the sell-off was more of a company-specific legal discount.

State Attorneys General Want Product Changes, Not Just Money

California Deputy Attorney General Megan O’Neill told the jury: the company repeatedly chose "profit safety" over "children's safety," "they concealed the truth." She cited an internal memo titled: "The youngest are best." The state’s requested relief is not limited to fines: it includes removing infinite scrolling, visible likes, beauty filters, and prolonged recommendations for users under 18; limiting minors' daily usage time, including during class and at night; and deleting non-compliant data collected from users under 13. If the judge orders design changes, the direct impact would be on usage time and advertising inventory, rather than a one-time fine.

The discrepancy in fine estimates is vast. Meta stated in its submission that, according to the state's calculation method, penalties could reach $1.4 trillion, close to its market value of about $1.5 trillion, and warned that "such a scale would effectively allow states to take over the company." California Attorney General Rob Bonta denied targeting this figure. Reports indicate that the state acknowledges a magnitude of about $200 billion, roughly equivalent to the company's net profit over three years. Legal observers believe that the trillion-dollar figure is more like a negotiation ceiling, difficult to uphold after an appeal; what is truly binding is the forced redesign of products. Santa Clara University professor Eric Goldman stated that the state is seeking a "decisive precedent," aiming for extraordinary damages and structural relief.

The judge has already opened several doors before the trial. The motion for summary judgment was denied, and the "failure to meet notification and guardian consent" under COPPA was partially recognized. Whistleblower Arturo Béjar has been allowed to testify. Zuckerberg and Instagram head Adam Mosseri are expected to testify. Béjar previously stated that about two-thirds of the tested teen safety tools were ineffective, with only about 17% working as advertised; The company questions its methodology.

New Mexico has already ruled once, this time it’s a federal benchmark

This year, Meta has faced consecutive losses in cases related to child safety. In March, a New Mexico jury found the company responsible for harm to adolescent mental health, imposing a civil penalty of $375 million; in August, a judge added a $567 million remediation fund, totaling approximately $942 million, and mandated stricter age verification, cancellation of nighttime notifications, and a five-year mandatory time limit for young users, while also determining that the platform constitutes a public nuisance. In a personal injury case in Los Angeles, Meta and Google were ordered to pay approximately $6 million in March. The Oakland case brings similar evidence and witnesses to federal court, covering 29 states' COPPA claims and four states' consumer protection laws, with amounts and scope of reform an order of magnitude higher. Additionally, there are over 2,600 personal, school district, and local government lawsuits queued in the same MDL.

A company spokesperson stated: The state’s so-called benchmark case lacks basis, and the funding demands are “severely disproportionate” to the alleged damages. The defense framework is: This is a referendum on the entire industry's adolescent mental health controversy, not provable fraud; no one was specifically misled; and the common industry challenges are unfairly attributed solely to Meta. Unlike personal injury cases, there is no single plaintiff or single path of harm here; the judge must make a policy-level judgment on whether “design choices constitute unfair trade and deception.”

The market is discounting both legal costs and product risks

This year, Meta's profits from April to June fell 13% year-on-year, with legal expenses accounting for about $2.4 billion. 24/7 Wall St. pointed out that the cost growth is outpacing revenue, putting pressure on free cash flow. On the day of the hearing, the market value evaporated corresponding to about a 4% drop in stock price, widening the gap with Nasdaq's approximately 1.3% decline. Gene Munster stated that adolescent safety is just “the tip of the iceberg,” worrying that the next generation of smart products could further expand the company's impact on underage users, potentially leading to larger lawsuits in the future. This is a forward-looking view, not a fact of the case.

Regarding the advertising model, risks are twofold. The first layer is cash: even if the final penalty is far below $1.4 trillion, hundreds of billions over many years of remediation will still raise effective tax rates and compliance costs. The second layer is product: if there is an unlimited decline, recommendations and duration are cut, leading to a decrease in young users' usage time, which will affect the supply and targeting of performance advertising. Instagram's reliance on the young demographic makes this relief closer to its main business than fines. Snap and Pinterest rose on Tuesday, indicating that funds are temporarily attributing the risk to Meta rather than the entire social sector