Bloomberg News

Facebook, Users Seek ‘Sponsored Story’ Lawsuit Accord Approval

June 21, 2012

Facebook Inc. (FB:US) and users of its social-networking site asked a judge to approve a settlement of a group lawsuit challenging a program that links subscribers’ likenesses to certain types of advertisements.

Facebook agreed to pay $10 million to be shared among advocacy groups for children, consumers and electronic privacy, according to the request for preliminary approval of the accord filed yesterday in federal court in San Jose, California.

The company also consented to revising its terms of usage so users can more easily see when they’re being shown as endorsers of products and games for which they clicked a “like” button and so they can limit the display of their content and interactions alongside what Facebook calls “sponsored stories.”

The goal is “to provide Facebook members with the ability to give informed consent to the use of their names and likenesses in friend-endorsed advertising, so they can limit being in such advertising if they so choose,” plaintiffs’ lawyer Robert Arns told the court in a companion filing.

Right of Publicity

An economist specializing in the right of publicity has valued those protections at $103.2 million, Arns said.

Andrew Noyes, a spokesman for the Menlo Park, California- based company, declined to comment on the accord.

The site changes are to be made within six months of final settlement approval and remain enforceable for two years, according to court papers.

Facebook allegedly appropriated names, photographs and identities of users to advertise products without their permission, according to the users’ complaint. Its “sponsored stories” were a “misleading advertising scheme” using material posted by Facebook members on their profile pages, the users claimed.

U.S. District Judge Lucy H. Koh has final say on the accord. The proposed settlement class includes anyone in the U.S. with a Facebook account whose name or likeness has been displayed with a sponsored story.

Within five days of Koh’s final approval, the company is required to pay Arns and the other plaintiffs’ lawyers fees and costs not to exceed $10.3 million. The three class representatives would each receive $12,500.

The case is Fraley v. Facebook Inc., 11-cv-01726, U.S. District Court, Northern District of California (San Jose).

To contact the reporter on this story: Andrew Harris in Chicago at aharris16@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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