Big Tech is in Big Trouble

Think you had a rough week? Imagine being a top lawyer at Meta or Google, who got their meditation session in the team offsite mindfulness pod interrupted by news that US juries just handed down two landmark rulings with global implications.

First, a New Mexico jury just ordered Meta (Instagram, Facebook, WhatsApp) to pay $375M for misleading users on safety, and exploiting childhood vulnerabilities for profit.

And second, a California jury has ordered Meta and Google (YouTube) to pay a 20-year-old woman $6M in damages after holding both tech giants responsible for her mental health struggles, finding they intentionally made social platforms addictive.

And… what about others like Snapchat and TikTok? These two might feel good about their decision to reach a quiet settlement earlier this year, though they’ll still feel the heat. Why?

Five quick things jump out about the immediate significance:

First, that California verdict just dodged the Section 230 immunity shield that’s protected Big Tech since the 1990s: tech tycoons always argued that holding Insta responsible for user content is like (say) holding Ford responsible for a hit n’ run. But this case has now said nice try, nerds, but we’re targeting your algorithms, not user content.

Second, that New Mexico verdict around negligent safety warnings smells a lot like the kinds of cases that eventually brought down Big Tobacco: you knew your products were harmful, but still opted to protect your profits rather than the people driving them.

Third, on both fronts (addictive design + negligent safety), the precedent is now set^* for thousands more lawsuits already in the waiting room: think states, schools, parents, kids.

Fourth, won’t someone think of the money! Meta alone earned a cool $200B in ~ad revenue last year, which is all realistically downstream of user screen-hours, now all seemingly downstream of an algorithm that just got dunked on in a US court. This likely explains why each firm just shed $100B in market cap within hours of these rulings.

Then fifth, while defenders argue Big Tech is just getting scapegoated for bigger, messier societal ills, it’s still all broader evidence of a mood souring against Big Tech, devolving from garage-born pioneers to reckless profiteers.

Ok, that’s very interesting we hear you say, but I distinctly recall signing up for a geopolitics newsletter, so where’s the Intrigue™?

Right now we see it via three big angles.

First, these decisions arguably erode US tech supremacy: reaching ~half the world’s population, they’re realistically now US strategic assets. And you can bet their lobbyists will now be warning DC that any court-ordered payouts and/or redesigns could weaken their competitive edge against foreign rivals (eg TikTok). Oh, and tighter profits will potentially mean tighter AI research and a slower data-centre rollout for the US.

Second, this is not just a precedent^* for US court cases, but also global regulators across the EU, UK, Australia, India, Brazil and beyond, who’ve been awaiting more political cover to rein in Big Tech without fear of US retaliation. Australia’s world-first social media ban for under-16s is already inspiring everyone from Spain to Indonesia, and any US retaliation only gets trickier if they’re now tracking the slipstream of America’s own courts.

And third, it all risks hastening the ‘splinternet’: ie, more and more capitals demanding more local moderation, more local servers, and even more local alternatives, accelerating the patchwork of national rules in the name of reasserting national sovereignty online. Tougher for any global tech giant to thrive in a splintered world.

Now of course, no lawsuit will crumble Instagram or YouTube’s monopoly overnight. But maybe that’s what makes the Big Tobacco comparison so arresting: tobacco’s downfall happened not overnight, but lawsuit by lawsuit, regulation by regulation. Is that ahead?

^*Anyway, given the stakes, both Meta and Google will inevitably now move to appeal it all.

Intrigue’s Take

Two bigger-picture points come to mind here.

First, long-gone are the days when what’s good for US corporates was thus good for the US. Globalisation has already shifted the consensus, as voters conclude this particular era just poured rocket fuel over capital while roundhouse-kicking labour. There’s a similar wedge now emerging here with tech: it’s been a great asset for shareholders, but is it proving to be a liability for families? DC might eventually have to pick a side. And maybe consumers will ultimately prefer a platform with balanced, democratic oversight?

But second, while that Big Tobacco comparison is grim, it’s also more nuanced than it seems: those firms adapted to a souring mood and hostile courts by jacking up prices, shifting marketing overseas, and diversifying into other products. The result? They’re now more profitable (by ROIC) today than in the late 1990s, even if they seem less popular.

So, bottom line? These two cases are a big deal, but it might be best to see them as the starter gun for years of appeals, lobbying, and pivots ahead, rather than the official finish line for any Silicon Valley era of ‘move fast and break things’.

Sound even smarter:

• Talking of Big Tech, a US judge has just temporarily blocked Trump 2.0 from blacklisting AI firm Anthropic, calling it a “classic First Amendment retaliation”. We wrote about the ongoing split here.