Facebook’s Sponsored Stories Lawsuit Gets New SettlementBy: Josh Wolford - October 9, 2012
Facebook is making another attempt to bring an end to a lawsuit over their advertising practices – mainly their Sponsored Stories ads. This time, after having a settlement rejected back in August, Facebook has changed up the monetary aspect of the deal as well as added more safeguards for users within its settlement obligations.
If you haven’t been following this particular case, it involves a class-action lawsuit filed by a handful of California plaintiffs. Their original complaint was that Facebook, through their Sponsored Stories, violated their privacy. They said that Facebook was guilty of using their likenesses in Sponsored Stories without their consent, compensation, or the choice to opt out. A few months ago, the parties hammered out a $20 million settlement that included a $10 cy pres payment to charity, along with the rest being designated to legal fees.
Facebook also claimed that changes to the way Sponsored Stories are operated and presented to users could amount in damages of over $100 million.
All seemed to be in order until a U.S. District Judge rejected the settlement, claiming concerns about the amount of the payout as well as the fact that no money seemed to be going straight to complainants. Facebook argued that the size of the possible complainant pool (over 100 million users) warranted the cy pres payment.
“California Civil Code §3344, however, under which plaintiffs’ claims are brought, provides for statutory damages of $750 for any violation. It very well may be, as Facebook argues, that plaintiffs’ chances of obtaining a judgment awarding such statutory damages to class members are remote, but their potential availability must be considered in evaluating the fairness of any settlement. Merely pointing to the infeasibility of dividing up the agreed-to $10 million recovery, or the relatively small per-use revenue Facebook derived, is insufficient, standing alone, to justify resort to purely cy pres payments,” said Judge Richard Seeborg.
Now, Facebook has come back with a revised settlement. This time, including provisions for complainants to receive a chunk of the payout.
“The new agreement, which is also subject to Seeborg’s approval, allows for some of the funds to go to charity, but only if there is any left after users’ claims, attorneys fees and other expenses are met. But given the size of the class, the charities might still get some cash. The agreement provides that, if it is not economically feasible to pay all the users a cut, the court may designate the entire fund as going to the charities,” reports Reuters.
Users would be able to apply for up to a $10 settlement.
“”We believe the revised settlement is fair, reasonable, and adequate and responds to the issues raised previously by the court,” said Facebook.
The revised settlement also enhanced the terms involving user privacy and protection – especially for minors. Previous versions of the settlement already tackled this, vowing to increase the visibility of information on Facebook’s ad practices and to allow users to control how past activities (ones made before the new terms) showed up in Sponsored Stories. Facebook also said they would let minors completely opt out of being used in these types of advertisements.
Facebook has clarified exactly how they are going to help parents who want to opt out their children:
Facebook will encourage new users, upon or soon after joining Facebook, to include in their profile information their family, including their parents and children. Where both a parent and a minor child are users and confirm their relationship, Facebook’s systems will record this confirmed parent/child relationship and utilize it as further described below.
Facebook will add an easily accessible link in the Family Safety Center (https://www.facebook.com/safety) to the tool it currently provides that enables parents to prevent the names and likenesses of their minor children from appearing alongside Facebook Ads and Facebook will extend this tool to enable parents to also prevent the names and likenesses of their minor children from appearing in Sponsored Stories. Facebook will also implement a method for enabling parents with a confirmed parental relationship with a minor user to utilize this tool through their own Facebook accounts, without obtaining access to their children’s accounts.
Finally, Facebook will add a control in minor users’ profiles that enables each minor user to indicate that his or her parents are not Facebook users. Where a minor user indicates that his or her parents are not on Facebook, Facebook will make the minor ineligible to appear in Sponsored Stories until he or she reaches the age of 18, until the minor changes his or her setting to indicate that his or her parents are on Facebook, or until a confirmed parental relationship with the minor user is established.
The next step is to wait and see whether the Judge finds this settlement acceptable. While we wait, do you think it’s acceptable?