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District Court Approves Facebook 'Sponsored Stories' Settlement

By Gabriella Khorasanee, JD on August 30, 2013 | Last updated on March 21, 2019

Facebook hasn't had much luck turning its users' info into paid ads. Ars Technica reports that first, Facebook Beacon was shut down in a settlement as a result of a class action privacy litigation. Now, Facebook's Sponsored Stories is getting tweaked as a result of a settlement approved by a district court judge on Monday.


Facebook launched Sponsored Stories in 2011 and it worked like this: when users "checked in" or "liked" a business, their posts, along with their profile photo, started appearing in the right column where ad appeared. Ars Technica reports that users were not made aware that their posts were being used in this way, and there was no opt-out feature.

Not surprisingly, plaintiffs filed a lawsuit alleging violations of California's unfair competition and right-of-publicity laws. Facebook quickly settled the case, but the first settlement agreement was not approved because it did not include a cash distribution to the class members and instead, only included cy pres distributions.

The Final Settlement

When the original settlement was not approved, the parties created a new proposal which in addition to cy pres distributions, included payments to class members. The district court, in determining whether to approve the proposed settlement, had to consider whether the settlement was free from collusion, reasonable and adequate.

In approving the settlement, the court noted that plaintiffs' claims were not dispositive and that Facebook had defenses to their claims. The court stated:

As Facebook points out, however, it is a platform for sharing information, which members join voluntarily. Members are not charged any fees for Facebook's services, which cost the company hundreds of millions of dollars to provide. While it does not follow that Facebook has carte blanche to exploit material belonging to, or regarding, its members in any fashion whatsoever, neither is it foreclosed from adopting SRRs that are not as 'pro-member' or 'pro-privacy' as some might like.

Given the surrounding circumstances, the court approved the settlement which called for: (1) $15 payment to each class member; (2) cy pres payment to organizations dealing with privacy, social media, research and consumer protection; (3) changes to Facebook's Statement of Rights and Responsibilities; and (4) the addition of systems to give users more information and control over how their profiles are used in Sponsored Stories.

Moving Forward

This kind of case is becoming more and more frequent, and is a testament to the need for Congress to act. Though the district court indicated that Facebook users voluntarily provide personal information, users may have a harder time at making claims to privacy violations. The court noted that a simple "opt-in" system may be the better, safer approach -- we'll see if Facebook heeds this advice.

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