Is this social media's tobacco moment?

Summary

Podcast Summary: "Is this social media's tobacco moment?"

Podcast: Unhedged (Financial Times & Pushkin Industries)
Hosts: Katie Martin (London), Robert Armstrong (New York), Hannah Murphy (San Francisco)
Date: March 31, 2026

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Overview

In this episode, the Unhedged team interrogates the recent seismic court ruling holding Meta (Facebook, Instagram) and Google (YouTube) liable for harm caused to children and teens through their platform designs. The hosts analyze whether this is a true "tobacco moment" for social media—potentially opening the floodgates to huge legal and financial exposure, and a wider reckoning with tech companies’ business models. The conversation spans markets’ reaction, legal nuances, and global trends in tech regulation, with commentary from all three hosts.

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Key Discussion Points & Insights

1. The Court Ruling and Its Stakes

[00:00–04:09]

• Context: A Los Angeles jury found Meta and Google liable in a case brought by a young plaintiff who argued that social media’s addictive and negligent product design exacerbated her mental health issues.

  • Quote [03:10], Hannah Murphy:
    “They had to show that [social media] contributed to her mental health problems, anxiety and depression… what they were looking at was whether features, like infinite scroll… made her addicted to the platform and in turn then caused her harm.”

• This is one of a series of nine test cases with thousands more potential claims involving individuals, school districts, and states.

• The ruling leverages product liability—not free speech or content regulation—pushing aside Section 230 protections by focusing on design rather than content itself.

  • Quote [05:39], Hannah Murphy:
    “We’re not even looking at Section 230. We’re going to tap away at the product liability space and look at negligence there.”

• Immediate market reaction: Meta shares down ~7%, Google ~5%. Unclear how much is due to this ruling vs. wider market turbulence.

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2. Is This the “Tobacco Moment” for Social Media?

[04:09–06:39]

• Meta and Google are massive, representing a combined 8% of the S&P 500, and dominate global digital advertising along with Amazon.

  • [04:37], Robert Armstrong:
    “Those three companies get half the Internet advertising dollars… they’re absolutely dominant."

• The fear on Wall Street is not the payout amount (“a few million dollars”) but whether this opens the door to massive liability through copycat lawsuits—a parallel to Big Tobacco’s historic legal reckoning.

• The hosts point out that claims could proliferate if courts accept the idea that product design—distinct from content—is to blame.

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3. The Legal Strategy: Product Design vs. Free Speech

[06:39–08:20]

• The plaintiffs’ strategy sidesteps Section 230, claiming the product—not just the user-generated content—creates the harm.

  • Quote [06:52], Robert Armstrong:
    “This concept that product design is not speech really has people thinking about the whole business model.”

• Meta’s defense remains largely grounded in free speech arguments, but the hosts note the clear line being drawn in litigation between “design” and “expression.”

• Critics argue speech and design are intertwined since engaging content powers “doomscrolling”—if content weren’t compelling, engagement-driven design wouldn’t matter.

• Armstrong draws a seatbelt analogy:

  • Quote [08:20], Robert Armstrong:
    “Suppose in 1972… the car industry had said, ‘If you make us put seat belts in these cars, you’re encroaching on our freedom of expression.’…You have to draw some line somewhere to what [free speech] allows you to do.”

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4. Bigger Regulatory and Social Backdrop

[09:04–10:18]

• Lawsuits and restrictions targeting children’s access to social media are increasing in multiple countries (e.g., Australia).

  • Quote [09:19], Hannah Murphy:
    “It’s a bit of a moment, particularly, as you note, for child safety.”

• In the U.S., there’s rare political consensus across parties about protecting children—even if debates over speech rage elsewhere.

• Increased scrutiny is driven by concerns about the impact of social media on “formative minds.” There’s a sense we’re now a generation deep into social media, with the resulting effects poorly understood but increasingly troubling.

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5. How Significant Is This for Investors?

[10:18–12:43]

• Armstrong expresses cynicism about the long-term impact of such lawsuits on tech company valuations, given past cases (e.g., Microsoft, browsers, Android) that fizzled out as tech evolved.

  • Quote [11:07], Robert Armstrong:
    “My basic default position… is this stuff never turns out to matter… tech companies and Internet companies in particular just keep rolling.”

• Key reasons:

  • Technology changes faster than lawsuits can be resolved.
  • Internet services are typically free, with vast demand.
  • Harms may be “real but probably vague,” and there are substantial benefits to these platforms.
  • Legal ambiguities (causation vs. correlation) benefit the platforms.

• The hosts note that the jury trial format benefited plaintiffs—with Mark Zuckerberg coming off as unsympathetic.

  • Quote [14:01], Hannah Murphy:
    “He came off sometimes kind of a bit arrogant and pushing back at the questions… There was also…emails from a few years back… ‘Our main goal is increasing time spent.’”

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6. Implications for AI and Platform Liability

[14:32–15:39]

• Lawsuits are emerging over alleged harm from AI chatbots (not just user-generated content).
• Unclear if Section 230 shields companies for content generated** by their own bots, as opposed to users.
  • Quote [14:46], Hannah Murphy:
    “These are products they have created and they may therefore have more liability for. The platforms are deliberately not talking about this… there’s a bit of a fear that this could come into play later down the line.”

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7. Next Legal and Political Steps

[15:39–16:49]

• Meta will appeal, likely relying on First Amendment and Section 230 arguments.

• Settling could open the door to even more claims (as TikTok and Snap did, pre-trial).

• If appeals rise high enough, a conservative Supreme Court could become decisive for the tech industry.

  • Quote [16:50], Hannah Murphy:
    “If I’m them, I’m going to take the gamble and… hope that the wider political moment and discussion around censorship versus free speech helps me when it comes to the appeals process.”

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Memorable Moments & Quotes

• The stakes for markets

  • Katie Martin [04:09]: “Meta is a $1.36 trillion company… Google… $3.3 trillion… together, that is 8% of the entire S&P 500 US stock index.”

• Armstrong’s parent perspective

  • Robert Armstrong [06:39]: “I have two 16 year olds in my house, and boy, is there a lot of infinite scrolling going on… I’m getting ready for my payday.”

• Zuckerberg on the stand

  • Robert Armstrong [13:46]: “If I’m a lawyer suing one of these companies, and Meta in particular, boy, do I want that Zuckerberg on the stand. Let’s just have a week of him talking…”

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Notable Timestamps

| Timestamp | Segment Description | |-----------|--------------------------------------------------------------------------------| | 00:00–02:03 | Episode opening and recent headline introduction | | 02:03–04:09 | What the LA court ruled, legal theories | | 04:09–06:39 | Market size and legal “tobacco moment” analogy | | 06:39–08:20 | Design vs. speech as a new front in litigation | | 09:04–10:18 | Tech regulation for child safety—global context | | 10:18–12:43 | Will this really matter to investors? Armstrong’s argument | | 13:46–14:32 | Meta’s courtroom approach and jury influence | | 14:32–15:39 | The emerging AI legal gray zone | | 15:39–16:50 | Next steps: Settlement vs. appeal and the looming Supreme Court | | 17:05–19:05 | Host “Long/Short” picks (bonus, light-hearted ending; not financial content) |

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Tone and Atmosphere

• Conversational, informed, sometimes wryly humorous; hosts move fluently from markets to legalities to personal anecdotes.
• Balanced skepticism and analytic depth: Armstrong’s legal cynicism is tempered by Murphy’s on-the-ground reporting from the courtroom and policy circles.
• Underlying urgency: Consensus that this may be a legal and regulatory inflection point is counterbalanced by wariness about overestimating lasting impact.

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Conclusion

The episode concludes that even if this is not exactly the “tobacco moment” for social media, it signals a strategic and potentially seismic legal shift—one that could constrain how tech giants design products, especially for children, and raise new questions as AI-generated content proliferates. The markets, legal experts, and investors are watching the appeals process closely, knowing that the outcome could shape not just lawsuits but the fundamental business model of internet platforms.

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For subscribers and more discussion, listen to future Unhedged episodes and sign up for the Unhedged newsletter at ft.com.

Transcript

[A]

Foreign. It's been a pretty wild few weeks and it's hard to keep on top of everything you need to know in markets and finance. But don't worry, listeners, we have got your back. One big story that's not about Iran came last week, and it's all about social media. A court found that both Meta, which owns Facebook and Instagram, and Google, which owns YouTube, are liable for content that's harmful to children and teenagers and they must pay a few million dollars in damages. Meta shares are down by about 7% since that ruling, adding to earlier declines, while Google is down about 5%. Now, how much of that hit to shares is down to the ruling and how much is down to the general hit to markets because of Iran? We don't know. But these are huge companies with a massive weight in every investor's portfolio. So this stuff matters. Today on the show, do these rulings open the floodgates for social media companies? Is this social media's tobacco moment? This is Unhedged, the Markets and finance podcast from the Financial Times and Pushkin. I'm Katie Martin, a markets columnist here at the FT in London where we have some much needed holiday days coming up. And I'm joined, yes, by the big fella, Rob Armstrong, my partner in crime, on the Unhedged newsletter in New York. But also, big love to Hannah Murphy, one of our super team in faraway San Francisco. Listeners. It's so early in San Francisco when we record this. Hannah, are you, like, awake?

[B]

I'm slowly rising and I've got a cold brew here to get me through very San Francisco.

[C]

Surely you've already been to a yoga class, done a cold plunge, had some centering meditation.

[A]

So while you're coming up on your cold brew, tell us what's happened.

[B]

So last week was the verdict in Los Angeles. The trial was a series, one of a series of nine test cases that are gonna set the direction for a kind of larger group of similar claims. That's sort of thousands of individuals, school districts, state attorneys general, who are going after Meta and Google and other social platforms at the moment seeking damages and design changes, arguing that these platforms by design have negligently harmed children and young people and are deliberately addictive. There will be a second set of cases heard in Oakland over the summer. But these really, the, the verdict really tells us, you know, what a jury thinks of Mark Zuckerberg and of YouTube when it comes to whether they are, in fact negligent in this case. So this is using product liability laws rather than looking at whether the content is harmful.

[C]

I see Hannah, who got hurt here and what harm did they suffer that they brought Meta and Google to court.

[B]

So in this case the plaintiff was called KGM or Cayley was a 20 year old woman arguing that over the course of her life using social media has, it wasn't, isn't sort of the only thing. They had to show that it contributed to her mental health problems, anxiety and depression. In turn, the platforms argued, well, there are other mitigating factors. She had suffered familial abuse for example. This wasn't on us, but really here what they were looking at was whether features, sort of like Infinite scroll for example, where you just go on and on and on, made her addicted to the platform and in turn then caused her harm. So it wasn't whether the content was particularly bad, but it's whether by design these platforms are meant to get you coming back. Just like I guess a slot machine in a casino.

[A]

And like this stuff all matters to markets, doesn't it Rob? Because these companies are like almost unbelievably enormous. So Meta is a $1.36 trillion company and Google or Alphabet, that's like $3.3 trillion worth of market capitalization. So you put them together and that is 8% of the entire S&P 500 US stock index.

[C]

And you might think about it this way. Think about how much Internet advertising you see every day, week, month, year of your life. Well, these two companies along with Amazon, which has a huge ad business, those three companies get half the Internet advertising dollars that get spent anywhere. So they're absolutely dominant in this form of advertising that really colors the, the kind of texture of our whole existence. So if this changes the way they have to do business, it's going to be big news for everyone in a certain way. Market, non market, whatever.

[A]

So shares have come off pretty hard. Like I say, it's a little bit difficult to disentangle how much of that decline in share prices is down to just other stuff and how much is specifically down to this. But they're only having to pay out a few million dollars in damages. What is the market extrapolating from here?

[B]

So I think to date the platforms have been protected by a legislation in the US called Section 230 of the Communications Decency Act. And that says that platforms cannot be liable for the user generated content that they host. And that is broad. That is sort of enshrined in the current discussion in the US around First Amendment rights and free speech. The plaintiffs here have gone a different route by saying, we're not even looking at section 230. We're going to tap away at the kind of product liability space and look at the sort of negligence there. And the fear is that now this is the first of a series of test cases, there will be more. But you see the direction that this could open the floodgates to anyone who says, oh, well, I'm feeling a little bit depressed and I just spent 10 days doom scrolling on social media. I think it was this platform that did that and going after the platforms to try and claim some money.

[C]

I have two things to say about it. One thing I have to say is that I have two 16 year olds in my house and boy, is there a lot of infinite scrolling going on in the Armstrong household. So I'm getting ready for my payday. That's point number one.

[B]

There you go.

[C]

Point number two is the point that, Hannah, you just made is the point that has Wall street really excited. This concept that product design is not speech really has people thinking about the whole business model. Right. And, and you notice, you know, in responding to the verdict, it's pretty clear that Meta is still going to fight on the speech line here. They're going to say that they, they're, they are protected by things like the First Amendment and Section 230, but this move of separating product design from freedom of expression or responsibility for expression, it's just a huge deal for the whole industry.

[B]

It feels like Meta is kind of seizing the political moment when there's a lot of debate about this. But I will say that I've also seen reaction from academics, safety experts who typically don't love Meta and are very critical, saying this sets a worrying precedent. They don't agree with it and it could have sort of ramifications down the line, they argue. Actually, both Meta and some of these more cautious experts say speech and the design factors are deeply connected. Nobody will doom scroll if there isn't compelling content on the platform in the first place. If it was just videos of paint drying, you would just put it down immediately.

[C]

But on the other hand, Hannah, let me, let me take the other side of that argument. Suppose in 1972, or whatever it was, the car industry had said, you know, if you make us put seat belts in these cars, you're encroaching on of our freedom of expression. We're, we're expressing a view about a lifestyle, a way, an American way of living, freedom and comfort. And I mean, of course this is an exaggeration, but you see my point Right. That the freedom of speech, broadly construed is very broad and, you know, you have to draw some lines somewhere to what that allows you to do. Right.

[A]

Where does this fit into the broader tech lash that we're seeing? Right, so you're seeing lots of countries looking to restrict the use of social media for children. Australia has already gone down that route. Is this sort of of a piece with. Is it connected?

[B]

I think so. It's a bit of a moment, particularly, as you note, for child safety.

[A]

Yeah.

[B]

Obviously across the political spectrum, there's sort of debates about where people stand on what speech should be allowed, harmful versus totally illegal speech, what should we be allowed to say on platforms. But in terms of whether children should be protected, there's a sort of bipartisan agreement that this is an area that you will get politicians on both sides riled up and saying, we need for the kids, think of the kids. So it seems to be part of that bigger moment where we're kind of having a conversation about what age should children start using social media? Are we now a generation into social media, seeing the repercussions on young, formative minds of constant social media use? And if so, can we correct that through? So this sort of ties into that.

[A]

I mean, my, my hobby horse on this whole issue is that certainly I know a good few Gen Xers and boomers who have like really lost the plot online. And you see lots of people who are not children who are radicalized online. And I don't, I'm not aware of very much that's been done about that. That's a whole other topic. But like Rob, say you assume that this does change the rules of the road for social media companies. These companies are so ginormous. They're such an important part of markets. You know, like it or not, they're a huge part of debt markets, they're a huge part of stock markets. They're everywhere. But like your view that you were talking about in your newsletter just, just the other day was that this sell off is overdone. Why, why are you confident about this? Please.

[C]

I have become so professionally deformed by covering tech industry lawsuits for like 20 years. And my basic default position on all of them is this stuff never turns out to matter. You know, you're, you're suing Microsoft, you're having suits over Java, you're having suits over Android. You know, it's this, it's that. And tech companies in general and Internet companies in particular just keep rolling. And I think there's a couple of Reasons for that. One is the technology changes quickly enough that by the time the legal issues get sorted out, you're on to the next phase of the game anyway. So you, like, you know, this is what happened with like the fight over browsers and antitrust. It's like by the time that lawsuit got worked out, browsers weren't important anymore. You know what I mean? They were a commoditized product. And also in the Internet services business in particular, these products are given away for free and demand for them is tremendous. Here is a free product that we all use and get value out of where the harms are almost certainly real, but probably vague and counterbalanced by pretty significant goods. All of this stuff I just mentioned, mix it together and you get my very cynical attitude that these kind of lawsuits just don't tend to amount to very much.

[B]

I mean, I think I agree that the, the academic literature around whether social media is harmful to children is, is mixed. There is pretty direct correlation between if you're a young woman and body image issues and dysmorphia if you're using a platform enough. But then as, as you say, Rob, on the counter side, there is people who might not find communities and are not particularly sociable out in the wild who online find their people and derive great benefit for that. And it's very hard to see what's kind of causation versus correlation. The platforms will say there's no link. Some academic studies will find there is and some will. They're not. But it's all murky, which I think plays to the platforms benefit. I think what worked against them in this trial is that it was a jury trial and that I was there when Mark Zuckerberg testified and he is not, he is not a sympathetic character.

[C]

I tell you what, Hannah, if I'm a lawyer suing one of these companies, and Meta in particular, boy, do I want that Zuckerberg on the stand. Let's just have a week of him talking. You know, it's like, you've gotta, you've gotta get in the bag.

[B]

He came off sometimes kind of a bit arrogant and pushing back at the questions. And so it was a bit sort of like, what are you doing? This is about, like a child's mental health. There was also a kind of this line that, oh, we weren't juicing for engagement or time spent. We really care about creating a valued community. Then they would show emails from a few years back that was like, our main goal is increasing time spent. And he'd say, oh, actually I meant like we changed. That used to be, but we've changed. We don't do that now.

[A]

So another I think important piece of context here is that we're already seeing some lawsuits come up from people who say they were harmed or their relatives were harmed by AI chatbots. Now where do they fit into all this?

[B]

Right, because at the moment, Google and Meta are two of the handful of companies really throwing billions of dollars into this. This is what is really preoccupying these companies. Winning this AI race and developing frontier models. What I think is interesting when it comes to the safety piece is that we are yet to know whether section 230 will protect these companies when it comes to content generated not by users, but by chatbots that they have built. And therefore these are products that they have created and they may therefore have more liability for. The platforms are deliberately not talking about this. I've heard even internally, no one's really supposed to bring it up too loudly because there's a general, a bit of a fear that this could come into play later down the line. So that's kind of lurking in the longer term.

[C]

I mean, I'd be interested to hear from you, Hannah. What do you think the next steps are on this road? What is the next big point we should be looking forward to?

[B]

Absolutely, the appeal moment. Meta certainly are going to throw everything at this and they're already, as you noted, using sort of rhetoric around free speech and First Amendment rights. And this will erode our God given First Amendment rights in the U.S. i was speaking to a policy person who worked for a rival company before the verdict and there was a moment when so TikTok and Snap both settled the case and we were sort of gamified. Okay, well what position is Meta in now? Meta and YouTube. If they settle, they open the floodgates to many more cases. So that's a lose if they go to trial and they win. All good and done. Although there might be an appeal process there. But it's a good sign. If they go and lose, what happens next? They appeal and they appeal during a Trump administration with if it made its way all the way up to the Supreme Court, a sort of conservative Supreme Court.

[A]

Right.

[B]

And this person was like, actually, you know, if I'm them, I'm going to take the gamble and I'm going to go and ride it out and hope that the wider political moment and discussion around censorship versus free speech helps me when it comes to the appeals process.

[A]

Essentially, ladies and gentlemen, that is American capitalism in, in glorious technicolor right there. This the American Dream. We are going to have to break there and come back in just one sec with Long Short. Okey doke. It is time for Long Short, that part of the show where we go long a thing we love or short a thing we hate. Hannah, it can be anything. So what you got today?

[B]

I am powered by this special cold brew. Inexplicably it is Wicked branded. I don't know why, some weird collaboration. I bulk ordered them and they all came with the wicked branding on.

[A]

So it's like witchy witchy coffee for witches.

[B]

Witchy coffee. It says it has your daily collagen boost. I don't really know what collagen is, but they love it here at ss.

[C]

Oh I bet they do.

[B]

So I'm getting it boosted as I struggle to stay awake during this early morning podcast.

[A]

Collagen in your coffee. Rob, what have you got?

[C]

I am long the FT news briefing podcast for totally non self interested reasons, including the fact that I'm going to be on the show later this week talking about the history of the taco trade on the one year anniversary of Trump's disastrous tariff announcements and subsequent chickening out. So I'm long that everybody listen in.

[A]

Shameless self.

[C]

Shameless self promotion. Totally mercenary.

[A]

I am long the Netflix documentary about America's Next Top Model. First of all, it's a bit of a kind of trip down memory lane and let's look at how like dreadfully thin and weirdly dressed everyone was in the early noughties.

[C]

Were you a fan of that show back then? Were you at home?

[A]

I loved it, yes, I did love it. But it has not aged well. And yeah, some of the behind the scenes drama that they talk about in this documentary is is pretty hair raising. So that was some high quality entertainment. So speaking of high quality entertainment, we're going to be back with more for you on Thursday. So listen up then. Unhedged is produced by Jake Harper and edited by Brian Urstadt. Our Executive producer is Jacob Goldstein. We had additional help from Topher Forehead. Cheryl Brumley is the FT's global head of Audio. Special thanks to Laura Clarke, Alistair Mackey, Greta Cohn and Natalie Sadler. FT Premium subscribers can get the Unhedged newsletter for free and a 30 day free trial is available to everyone else. Just go to ft.com unhedgedoffer I'm Katie Martin. Thanks for listening.