A northern California district judge has said that "economic injury" could be proven by plaintiffs suing Facebook over Sponsored Stories, and Facebook has agreed to settle the lawsuit with a $10 million charity donation.
The complaint at the heart of Angel Fraley et al vs. Facebook was with the legality of the company's relatively new types of ads - Sponsored Stories. You've probably seen them appearing with more frequency inside your News Feed - "Sam Johnson likes Starbucks - Promoted," and such. Sponsored Stories allows advertisers to promote a user's activity, for instance liking a product or playing a certain game, after the fact.
Of course, the thought 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 involved in this lawsuit, Facebook's Sponsored Stories are a violation of California law because they "publicize" user data without compensation, and the uncompensated users are also unable to opt out of having their activities (and names and images) used as adverts.
According to Reuters the suit, which was seeking class-action status, was actually settled outside of court last month - but was just recently made public.
In holding up the plaintiffs' claim for economic damages, District Judge Lucy Koh said,
"California has long recognized a right to protect one's name and likeness against appropriation by others for their advantage."
While the Sponsored Story may continue to run up against California law, that's not the only place where Facebook could see some opposition. This lawsuit is definitely not the first of its kind around the world. Back in April, a Vancouver woman filed a similar suit in a British Columbia court.
She claimed that Facebook fails to acquire users' consent or even give users notification that their likenesses are being used in Sponsored Stories, nor do they compensate them or allow them to opt-out. She claimed that these actions were in violation of Canadian law and called Facebook's Sponsored Stories "high-handed, outrageous, wanton, reckless, callous, disgraceful, willful and entirely without care for the plaintiffs and Class members’ statutory right to control the use of their own names or portraits, and as such renders Facebook liable to pay punitive damages."
Facebook currently handles Sponsored Stories differently that 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 that Facebook will pay in the California case is part of a cy-pres settlement, which means that all of the money can go to charity.