Los Angeles — In a shocking turn of events, social networking humongous Facebook Inc has agreed to cough up $10 million to charity to settle a “Sponsored Stories” lawsuit that accused the site of violating users’ rights to control the use of their own names, photographs and likenesses, according to court documents made public over the weekend.
The lawsuit, initiated by five Facebook members, claimed the social media site violated California law by publicizing users’ “likes” of certain advertisers on its “Sponsored Stories” feature without paying them or giving them a way to opt out, the documents said.
Dubbed as “Sponsored Story” is an advertisement that pops-up on a member’s Facebook page and generally consists of another friend’s name, profile picture and an assertion that the person “likes” the advertiser.
Meanwhile, U.S. District Judge Lucy Koh said the plaintiffs had shown “economic injury” could occur through Facebook’s use of their names, photographs and likenesses, and Facebook has agreed to settle the lawsuit with a $10 million charity donation.
California has long recognized a right to protect one’s name and likeness against appropriation by others for their advantage,” Koh wrote.
As a matter of fact, the lawsuit at the heart of Angel Fraley et al vs. Facebook was with the legality of the company’s somewhat new types of ads — Sponsored Stories. You have probably seen them coming along with more frequency inside your News Feed–“Sam Johnson likes Starbucks–Promoted,” as such. Sponsored Stories authorizes advertisers to promote a user’s activity, for instance liking a product or playing a certain game, after the fact.
According to the lawsuit, Facebook Chief Executive Mark Zuckerberg was quoted as saying that a trusted referral was the “Holy Grail” of advertising.
However, Facebook’s help center noted that users cannot opt out of being featured in Sponsored Stories, but can configure their privacy settings according to their own preference to make sure they are only sharing information about their “likes” with the people they find appropriate.
“Sponsored Stories respect your privacy settings. This means only the people you are already sharing your activity with on Facebook can see Sponsored Stories about you,” the company’s FAQ says.
As a matter of fact, the entire concept behind Sponsored Stories is that a recommendation that looks like its coming from a friend or family member is worth a whole lot more than a standard ad you might see on the side of the page.
For the five people engaged in this lawsuit, Facebook’s Sponsored Stories are a violation of California law because they “publicize” user data without compensation, and above all, the uncompensated users are also unable to opt out of having their activities (and names and images) used as adverts.
Facebook has declined to comment on the lawsuit and settlement.
Additionally, the lawsuit referred comments from Facebook chief operating officer Sheryl Sandberg, stating that the value of a “Sponsored Story” advertisement was at least twice and up to three times the value of a standard Facebook.com ad without a friend endorsement.
It is just another court case involving the social networking giant, which currently handles Sponsored Stories differently than more traditional advertisements that contain organic content from the advertiser as well:
We sometimes allow businesses or anyone else to sponsor stories like the ones that show up in your News Feed, subject to the audience set for that story. While these are sponsored, they are different from ads because they don’t contain a message from the person that sponsored them. Your friends will see these stories even if you have opted out of the Show my social actions in Facebook Ads setting.
The $10 million settlement that Facebook will pay in the California case is known as a cy-pres settlement, which means that all of the funds can go to charity.
The case in U.S. District Court, Northern District of California is Angel Fraley et al., individually and on behalf of all others similarly situated vs. Facebook Inc., 11-cv-1726.