Meta Platforms agreed to pay a maximum $16.68 billion and make major changes to Facebook and Instagram to resolve claims by states across the U.S. that the company designed those platforms to addict children, misled consumers about their safety, and improperly collected children’s personal data, court papers show.

Meta shares were down 0.4% in early trading.

Chris Beauchamp, chief market analyst at IG Group said the market seems to be reacting positively to the settlement. “Investors seem relieved that the penalty was not as severe as it could have been, given the scale of the case and the potential for a much larger fine. The settlement is more significant for what it says about the broader regulatory and reputational environment. There is growing scrutiny of social media’s impact, particularly among parents and younger users, and the required measures signal that regulators are taking a tougher stance,” he added.

Jim Speta, a professor at Northwestern Pritzker School of Law, indicated that the settlement highlights two overlapping developments.

“First, although Meta had legal arguments to resist liability, the number of suits pending and the early losses in Los Angeles and New Mexico increased the risks of continuing to litigate,” Professor Speta said. “Second, public opinion has turned and has come to favor changes to the way social media companies do business, especially with respect to children. In that environment, Meta and other companies were facing pressure to change business practices whether or not they lost the lawsuits, from the public and from Congress and state legislatures that were beginning to consider other legal limits.”

He said restrictions on social media platforms will change the user experience and the future effect is unknown.

“I think these restrictions will change the experience on Instagram and Facebook, and they are designed to reduce engagement,” said Speta. “It remains yet to be seen what the effects will be – both on how people, especially children, use these platforms and how the company’s revenues change if advertisers also are affected by decreased engagement. Yet, there is no doubt that this is a big deal.”

(Reporting by Jaspreet Singh, Ananad Gopal, Ragini Mathur, Sudeshna Ghoshal, Utkarsh Hathi in Bengaluru; Editing by Sweta Singh and Saumyadeb Chakrabarty)