Analysis
A New Mexico judge’s $25 billion penalty against Meta on Oct. 21 is the largest fine ever against the company, but Meta says it will prevail on appeal and the money could take years to arrive. The case raises questions about how far state penalty laws should stretch and whether lawmakers should plan around money they have not yet collected.
Analysis
A New Mexico judge on Oct. 21 ordered Meta to pay $25 billion for deceiving Facebook users about privacy, the biggest fine ever against the company, according to the Seattle Times. Meta says it is confident it will prevail on appeal. The state could wait years for the money.
The context
The case grew out of the Cambridge Analytica episode. The Seattle Times reported that a third-party personality quiz harvested data from roughly 87 million profiles and sold it to the political consulting firm. The state filed its lawsuit in 2021.
Judge Francis Mathew wrote that Facebook’s deception was intentional. He also wrote that executives consistently misled users about how the platform worked.
New Mexico took a different road than most states. In August, Meta settled with nearly all states and territories, except New Mexico and Florida. The deal was $18 billion plus stronger child-safety measures on Facebook and Instagram. New Mexico chose to go alone.
The size of the award stands out. The Federal Trade Commission fined Facebook $5 billion in 2019. Villanova law professor Peter Ormerod said the New Mexico award works out to about $12,000 per person in the state. He called it “quite unlike anything else we’ve seen.”
The jury was not fully on the state’s side. Per the Seattle Times, jurors turned down allegations that Facebook lied about how it took down harmful material, COVID-19 misinformation among it. Meta’s attorneys contended that the state had not demonstrated that anyone suffered injury from misleading statements.
Meta is a very large company. The Seattle Times reported a market value of $1.8 trillion and more than $200 billion in revenue last year. Shares traded 2% higher after the ruling.
Nidhi Hegde, executive director of the American Economic Liberties Project, called the award “a drop in the bucket for Meta.” She said it still shows that people want accountability.
The take
This section is analysis, not reporting.
Start with the principle. Free enterprise runs on keeping your word. The judge wrote that Facebook told users they controlled their data and that this was false. Conservatives who defend markets have no reason to defend that.
Then look at the limits. The size of a penalty is a policy choice made by courts and, soon, by legislators. Attorney General Raúl Torrez said the Unfair Practices Act needs to be “dramatically restructured.” The reports did not say what the rewrite would contain.
That is the part to watch closely. A bill that punishes plain lies to customers is one thing. A bill that raises penalty caps or widens what counts as deceptive is another. Limited government means limits on penalties as well as limits on companies.
Meta says the case is a “tax on speech.” Its lawyers told the court that an award many times larger than $3.4 billion would be unconstitutional. The Constitution as written is the right test, and an appeals court will apply it. The reports did not lay out the specific arguments Meta will make.
Consider also the money. State Rep. Nathan Small, who chairs the House Appropriations and Finance Committee, said the dollars would be directed to uses as lawmakers “build our state budgets for the years to come.”
But the Seattle Times reported it could take years for the state to get paid. It also said Meta could succeed in reducing the number of violations. A family does not spend a bonus before it clears the bank. A state budget should not either.
Finally, a fine is not the same as a fix. The state argued that the company would change only if its stock price were hurt. On the day of the ruling, shares rose 2%. The reports did not say whether the ruling requires Facebook to change how it handles user data.
What to watch
- The appeal. The reports did not say when Meta will file or how long it will take. Watch whether a higher court cuts the number of violations.
- The legislative session. Torrez and a state lawmaker plan to rewrite the Unfair Practices Act. The reports did not give a start date or bill text.
- Interest. The Seattle Times reported that interest would accrue on the penalty during the appeal.
- Florida. Florida also stayed out of the August settlement. The reports did not say what comes next there.
Sources
This story is developing and will be updated.
What it means for you
- The $25 billion is not in New Mexico’s hands. The Seattle Times reported it could take years to collect while Meta appeals.
- The final number could shrink. Meta could succeed in reducing the number of violations, even as interest accrues.
- Watch the New Mexico bill to rewrite the Unfair Practices Act. The reports did not say what it will contain.
- Lawmakers have already talked about budgeting these dollars. The money has not been paid.