Meta Platforms Inc has agreed to pay up to approximately $18 billion to settle a landmark case with multiple US states, addressing allegations that it deliberately engineered Facebook and Instagram to foster compulsive usage habits among young users.

According to court documents disclosed on Wednesday, key terms of the settlement require Meta to introduce new protective measures across its platforms, including limiting the duration of continuous browsing for teenagers and preventing them from disabling certain safety settings without parental consent.

The agreement covers payments to resolve different claims across multiple lawsuits. Meta has consented to pay up to $16.7 billion to settle the core litigation currently underway in Oakland, California. Additionally, the company will disburse $459 million to resolve other privacy-related claims, along with $75 million in legal fees.

Separately, Meta stated it has reached an agreement with Texas to pay up to $1 billion. Certain portions of these payments are contingent on other social media companies adopting similar platform adjustments and making corresponding payments. The agreement remains subject to judicial approval.

Meta denied the allegations in the court filings and noted that the settlement does not constitute an admission of liability.

The settlement was reached as jury proceedings entered their second week in the US federal court in Oakland, California. The case carried enormous risk for Meta. Top legal officials from 29 states were not only seeking substantial financial penalties on behalf of the public but also requesting court orders that could have compelled Meta to overhaul its platform operations.

The states accused Meta of violating state consumer protection laws and federal privacy legislation. Potential fines could have accumulated rapidly, calculated based on millions of young Instagram and Facebook users. By Meta's own estimation, an adverse verdict could have resulted in fines up to $1.4 trillion—an amount approaching its market capitalization and unprecedented in legal history.

At 11:30 AM New York time, Meta shares rose approximately 2.2%, following earlier fluctuations. Bloomberg had reported on Tuesday evening that discussions regarding a potential settlement during the trial were underway.

In a statement on Wednesday, Meta said: "Ensuring that teens have safe, positive experiences on our platforms has always been core to Meta. We want to do right by parents and teens."

Meta also indicated the agreement includes default settings that restrict teen app usage during nighttime hours and disable notifications during school periods. The proposed settlement further includes appointing an independent auditor to oversee Meta's compliance, who can offer independent recommendations and report findings to the states.

The agreement will also require Meta to enhance age verification tools to more accurately identify younger users on its platforms. Teenagers will face restrictions on certain features, including viewing post likes and using beauty filters.

California Attorney General Rob Bonta stated: "Meta has agreed to make sweeping changes to reduce the risk of harm on its platforms, which will be implemented over the coming months."

The settlement does not require Meta to pay the full amount immediately. Under the agreement, Meta is formally obligated to pay states a combined total of $12.19 billion over ten years. This figure would only increase to the full $17.1 billion settlement value if other platforms agree to similar safety provisions and pay corresponding settlement amounts.