A major legal case is set to begin this week that could shape how investors view large social media firms. Meta Platforms (META), TikTok, and Alphabet-owned (GOOGL) YouTube will face trial over claims that their apps harmed teen mental health through addictive design.
Claim 50% Off TipRanks Premium
- Unlock hedge fund-level data and powerful investing tools for smarter, sharper decisions
- Stay ahead of the market with the latest news and analysis and maximize your portfolio's potential
The case centers on a 19-year-old woman from California, known in court papers as K.G.M. She says she became hooked on social media at a young age and that heavy use worsened her depression and suicidal thoughts. She is asking a jury to hold the companies liable.
This is the first case of its kind to reach a full trial. Until now, similar claims were either dismissed or settled early. As a result, this trial is seen as a legal test for the idea of social media addiction. “They will be under a level of scrutiny that does not exist when you testify in front of Congress,” the plaintiff’s lawyer Matthew Bergman told Reuters.
The jury will need to decide if the companies were negligent and whether the app use played a major role in the harm. Other factors, such as offline life and third-party content, will also be weighed.
Company Defenses and Investor Relevance
Meta Platforms is expected to argue that its products did not cause the plaintiff’s mental health struggles. Mark Zuckerberg is expected to testify, which raises the profile of the case. YouTube says its platform is different from apps like Instagram and TikTok and should not be treated the same.
TikTok has declined to outline its legal strategy. Snap Inc. (SNAP) was also named in the case but agreed to settle on January 20. The company did not share details of the deal.
Legal experts say the outcome may shape future lawsuits. “This is really a test case,” said Clay Calvert, a media lawyer quoted by Reuters. “We’re going to see what happens with these theories.”
From an investor’s view, the risk is not about near-term revenue. Instead, the concern is long-term pressure on product design, rules, and legal costs. A loss could invite more lawsuits and closer oversight.
At the same time, the companies are pushing back in public. Meta has sponsored parent safety events at U.S. high schools since 2018. TikTok has funded similar programs with local PTAs. YouTube’s parent Alphabet has worked with the Girl Scouts on online safety lessons. Critics say these efforts may blur the message for parents. “These companies are using every lever of influence that you can imagine,” said Julie Scelfo of Mothers Against Media Addiction.
We used TipRanks’ Comparison Tool to align all social media stocks to gain an in-depth view of each stock and the broader social media sector.
