Meta slapped with $25bn fine for decade of 'lies' over Facebook user data in historic New Mexico ruling

Meta just got hit with the biggest fine in its history, and the judge didn't mince words about why.

A New Mexico judge ordered the company behind Facebook, Instagram and WhatsApp to pay $25 billion on Wednesday after a jury found it had spent more than a decade lying to the public about how it handled user data.

"The lies extend beyond Facebook's data practices as well, they go to the heart of Facebook's core business practices."

That was Judge Francis Mathew, who wrote that the violations were "willful" and spanned "more than 11 years," stretching from 2010 to 2021. Communications between senior executives, including Mark Zuckerberg himself, were, he said, "designed to mislead the public."

The price of a decade of deception

The $25 billion figure is eye-watering, but it's a haircut for a company of Meta's size. The full penalty, calculated from thousands of violations of New Mexico law, actually came in at a staggering $219 billion before the judge slashed it down.

State lawyers had sought up to $40 billion. Meta had argued anything above $3.4 billion would be unconstitutional. The judge split the difference and then some, landing on an amount roughly equal to the company's quarterly profit.

The Cambridge Analytica hangover

The case traces back to the scandal that nearly sank Facebook, the Cambridge Analytica debacle, in which a political consulting firm vacuumed up data on millions of users to help sway the 2016 presidential election that first sent Donald Trump to the White House.

But New Mexico didn't stop there. The state also accused Meta of intentionally misleading the public about how it profited from hate speech and how it enforced, or didn't, its own rules against it. The jury agreed on every count.

"No corporation is too powerful"

Attorney General Raúl Torrez struck a victory lap on Wednesday.

"For too long, powerful technology companies have operated as though their size and influence put them beyond the reach of the law. Today's result makes clear that no corporation is too powerful to be held accountable."

Meta's head lawyer CJ Mahoney saw it very differently. He said the ruling made it "all but impossible to do business in the state of New Mexico" and vowed to appeal, insisting the company would win.

"At its core, this lawsuit seeks to impose a tax on speech to enforce new rules for what people can say online."

Meta's year of paying the piper

The New Mexico hammer is just the latest in a bruising year for the tech giant. It already agreed to an $18 billion settlement with California over child safety and was fined nearly $1 billion by New Mexico in a separate case where the judge compared the company to an industrial polluter, its form of pollution being "the psychological harm and sexual exploitation of children."

And the $25 billion whack comes on top of the $5 billion the Federal Trade Commission levied against Meta back in 2019 for its data privacy practices, a penalty that once looked like a wrist slap and now looks like a down payment.

Burning cash to chase the AI dream

The fines are a rounding error compared to what Meta is spending to chase the AI boom. The company expects to pour at least $135 billion this year into mostly AI projects, and could spend up to $145 billion.

That splurge is so aggressive Meta posted negative cash flow of more than $2 billion, the first time that's happened since the company went public 14 years ago, according to a BBC review of its financial filings. The company is now spending more than it brings in, even as it brings in more than ever.

Zuckerberg told analysts his consumer AI tool, Muse, already has 10 million users and that "growing Muse to serve billions of people is both our mission and our strategy."

A stock split and a spending spree

To fund the arms race, CFO Susan Li announced a new stock split, handing existing shareholders one new share of non-voting stock. Li said the new class wasn't earmarked for a single deal but alluded to ongoing AI costs and said the company could use "more funding flexibility" next year.

The spending is racing ahead even as Meta's revenue jumped 26 percent in the July-to-September quarter to $64.5 billion and profits tripled to $9.8 billion. It is a company minting money and setting it on fire at the same time.

For New Mexico, the fine is a landmark. For Meta, it's a bill it can pay. The real question is whether the appeal buys the company time or a reckoning, and whether the next judge is as willing as Judge Mathew to call a lie a lie.