Facebook has agreed to pay $10 million to settle a lawsuit over its Sponsored Stories ads, Reuters reported on Saturday, June 16. According to court documents made public over the weekend, the lawsuit accused the social networking giant of violating users' rights to control the use of their names, photographs and "likes" on the site.
The proposed class-action lawsuit against Facebook was brought to federal court in San Jose, California, by five Facebook users, and alleged that the social network violated California Law by publicizing users' likeness of certain ads on the site's Sponsored Stories feature. The users were not paid, nor given the possibility to opt out, stated the documents.
Facebook's Sponsored Stories consist of ads that appear on a user's Facebook page. The ad generally includes another friend's name, profile picture, along with the assertion that he/she "likes" the advertiser. The matter has raised privacy concerns among users and Facebook has been battling it for a while now. The company reached a settlement last month, but the details and amount to pay were only made public this weekend.
According to previous court documents, Facebook dodged a big bullet with this settlement, as the proposed class-action lawsuit could have included nearly one of every three Americans, which would amount to billions of dollars in damages.
Facebook CEO Mark Zuckerberg was quoted in the lawsuit as saying that the "Holy Grail" of advertising lies in trusted referrals, such as those assertions that one of your friends likes the certain brand being advertised. The lawsuit also cited comments from Facebook COO Sheryl Sandberg, who stated the value of a "Sponsored Story" ad was at least twice and up to three times that of a standard Facebook.com advertisement without a friend endorsement.
According to U.S. District Judge Lucy Koh, the plaintiffs had shown that Facebook's use of their names, photos and likenesses could cause economic injury. "California has long recognized a right to protect one's name and likeness against appropriation by others for their advantage," wrote the judge.
The $10 million Facebook is to pay, however, will not go to the five Facebook users who brought the lawsuit, but to charity.
The case is Angel Fraley et al., individually and on behalf of all others similarly situated vs. Facebook Inc., 11-cv-1726, U.S. District Court, Northern District of California.
