Facebook to Pay $20M to Settle ‘Sponsored Stories’ Suit

Posted October 16, 2012 in Social Networks by

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Facebook plans to settle a California class action over its use of users’ names and their profile pictures in its “Sponsored Stories” program for $20 million, after having the first settlement attempt rejected by a judge in August.

The class – which could include up to 125 million Facebook users – accused the social networking site of using their names and/or likenesses without their permission to promote products and services in violation of California’s state laws against using names for commercial purposes and against unfair business practices.

According to the order issued by the court in August, the initial settlement was rejected due to concerns that the class was “too big to settle.” Facebook had initially offered to pay $10 million into a pot to be split among class members, their attorneys and charity or research groups. That could have left the plaintiff class with basically nothing, since so many people use Facebook.


Sponsored Stories Snuck in

“Sponsored Stories are a form of advertising that typically contains posts which appeared on facebook.com about or from a Facebook user or entity that a business, organization, or individual has paid to promote so there is a better chance that the posts will be seen by the user or entity’s chosen audience,” according to the proposed notice that will be sent to all members of the class.

The revised proposed settlement includes 18 examples of Sponsored Stories, which range from “John Smith and Jane Doe like Southwest Airlines” (along with the airline’s logo) to “John Smith likes George W. Bush Presidential Center” (along with a news story and photo from the center showing Bush playing golf on Memorial Day with wounded veterans).

If you ever “liked” a product or game or organization on Facebook, you could have been a victim of Sponsored Stories, which make it look like your profile is part of an ad. Businesses pay Facebook to publish Sponsored Stories – and will continue to do so.

Facebook didn’t tell its users in January 2011 that it was going to start using their profiles to do this, nor did it give them a way to opt out, according to the original complaint, filed on March 11, 2011. Under the settlement, Facebook will change its terms of service to explain that by using Facebook, you agree to be part of sponsored stories.


Use Facebook, Be in an Ad

Under the settlement, which will likely be approved in an Oct. 25 hearing, if you use Facebook, by default you give it permission to use your profile in its ads. “You give us permission to use your name, profile picture, content, and information in connection with commercial, sponsored, or related content (such as a brand you like) served or enhanced by us,” reads the proposed terms of service.

Facebook also promises in the proposed settlement to give users “an easily accessible mechanism” to allow them to see the content from their profiles that’s been used in Sponsored Sories, to control what appears in them or to opt out.

Under the settlement, a $20 million fund will be available from which class members can make claims for payments of up to $10. Facebook will also be allowed to challenge the plaintiffs’ request for attorneys’ fees and expenses.

“Regardless of the number of claims made or the amount of the attorneys’ fees the Court approves, none of the $20 million will return to Facebook,” says the proposed settlement. After paying all fees and claims, whatever is left will go to charities and research groups.

“We believe the revised settlement is fair, reasonable, and adequate and responds to the issues raised previously by the court,” a Facebook spokesperson tells Lawyers.com.


Do you think Facebook should be able to feature users’ “likes” in paid ads by default? Share your opinion below.


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