The suit also names chief executive Mark Zuckerberg, Chief Financial Officer David Wehner and the company’s head of global affairs and communications, Nick Clegg, alleging that they knew the company was falsely representing how its products affected users but didn’t correct the record.
A Meta spokesperson said the suit was “without merit” in an email to The Washington Post. “We will defend ourselves vigorously.”
The lawsuit is based on revelations stemming from what’s known as the Facebook Papers, a trove of internal documents that shows the social media giant privately and meticulously tracked real-world harms exacerbated by its platforms, ignored warnings from its employees about the risks of their design decisions and exposed vulnerable communities to a cocktail of dangerous content.
Whistleblower Frances Haugen provided the documents to the U.S. Securities and Exchange Commission and Congress. Redacted versions were reviewed by a consortium of news organizations, including The Washington Post, which obtained additional internal documents and conducted interviews with dozens of current and former Facebook employees.
The company’s stock fell sharply after the revelations. Within roughly a month, they shed $54.08 apiece, Yost’s office said in a news release, “causing OPERS and other Facebook investors to lose more than $100 billion.”
The company’s stock has since recovered from those late October lows, when shares traded near $312. They closed Tuesday at $342.96, which is nearly 10 percent off the record high it reached in September.
The lawsuit is seeking more than $100 billion in damages and calling on the company to make “significant reforms” to ensure more transparency about its internal practices.
The lawsuit alleges the company violated federal securities laws by misleading the public about how its algorithms affect minors in an effort to boost stock prices. It was filed in U.S. District Court of Northern California, where Meta has its headquarters.
Jeff Chester, executive director of the Center for Digital Democracy, an advocacy group, said investors and pension funds could present serious challenges for the company if they seek redress in light of Haugen’s revelations. He also said Zuckerberg’s tenure as chief executive could now be in play, because questions about his ability to manage the company in a trustworthy manner are now a focus of litigation against the company.
“Until now, [Meta] has been able to either quash calls for regulation or hasn’t experienced serious economic damage due to its bad behavior (such as the $5b FTC fine),” Chester said in an email. “But with growing calls for the SEC to act, as well as what will be a wave of lawsuits focused on the company’s financial improprieties, there are likely to be consequences.”
The $5 billion refers to a 2019 settlement the company reached with the Federal Trade Commission after a series of massive privacy mishaps.
Meanwhile, the company is still responding to an antitrust lawsuit by the regulator that, if successful in court, could force Meta sell acquisitions that have been key to its success, including its WhatsApp and Instagram platforms. The agency has argued that Facebook sought to neutralize nascent competitors by gobbling them up through an “anticompetitive acquisition strategy.”
In early November, the company said it would end its use of facial recognition software. The move comes after it agreed to pay $650 million to resolve a privacy lawsuit that alleged it used photo face-tagging and other biometric data without the permission of its users.