The claims brought against the social media giant, founded by Zuckerberg in 2004, have been described by some experts as social media’s “big tobacco moment”.
The states had argued that Meta “exploited how kids’ brains work” in an effort to keep them hooked on social media.
Lawyers for the states told the court that Meta’s business model was to “hook the users” and then “hide the truth” of the damage caused by its apps.
Meta had warned the total damages from the case could spiral as high as US$1.4t ($2.3t), almost its entire market value, although the states had been seeking about US$200b.
Shares in Meta jumped as much as 5% on news of the settlement.
Meta said the settlement included US$75m in legal fees, another US$459m to settle other privacy claims and a separate US$1bn settlement with Texas. It would pay US$18b in total.
Under the deal, about 70% of the US$16.7b settlement (US$12.7b) will be paid out to the US states over a 10-year period.
The remaining 30% (US$5.3b) will only be paid if Meta’s main rivals YouTube and TikTok agree to introduce similar safety measures and also pay a combined US$5.3b to US states.
The unusual fee structure is thought to be driven by Meta’s fears that teens will simply flock to its rivals if they do not also restrict their services.
TikTok and YouTube – owned by Alphabet – have faced several similar lawsuits to Meta.
New safety measures that Facebook and Instagram will have to introduce include a daily two-hour time limit on the apps for under-18s, which teenagers can only turn off with parental permission.
The apps will also interrupt teenagers with alerts after they have been using them for 15 minutes, and notifications will be muted by default between school hours of 8am and 3pm. By default, the apps will be blocked between midnight and 6am.
Teenagers will also not be able to see how many likes are on their posts, or other people’s posts, while the app will ban “extreme makeup” filters for teenagers.
A new independent social media foundation will be established as part of the deal, which will have access to data from Meta to research teenage wellbeing online.
CJ Mahoney, the chief legal officer of Meta, said: “Our new time limit commitments, night mode features and usage limits during school hours set the right path forward for our whole industry, but this framework will only work if all our peers join us.”
Meta, which did not admit wrongdoing as part of the deal, agreed to pay US$2.1b to the state of California under the settlement. Other states will receive a share of the remaining billions.
The social media giant will be required to maintain a sweeping new set of safety restrictions for 10 years, according to the court filing.
California Attorney General Rob Bonta said: “Today, we have secured a settlement with Meta that will make social media less dangerous for our kids and make a world of a difference for children and their families.
“Meta has agreed to make massive transformations that will reduce the risk of harm from its platforms – and will do it within months.”
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