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Second 'sponsored stories' settlement attempted by Facebook

updated 06:26 pm EDT, Mon October 8, 2012

Offer swaps $10 million charity offer to user payout

Facebook has floated a proposal to replace the previously rejected offer to settle a class action suit accusing it of violating the rights of its users through the "sponsored stories" advertising feature. The new settlement removes provisions for $10 million for charity payouts, and replaces it with an option for affected users to apply for a cash payment of up to $10 each. If the court deems it not economically feasible to pay the users, the court may designate the entire fund to go to charity, as per the previous settlement proposal.

The initial agreement provided no money to class members, and set aside $10 million to be given to Internet privacy-related charities. US District Court Judge Richard Seeborg rejected the initial settlement proposal on August 17, after wondering why there were no funds available for claimants. Both settlement offers include terms on targeting children, and an agreement to give users more control over how names and likenesses are used.

"We believe the revised settlement is fair, reasonable, and adequate and responds to the issues raised previously by the court," Andrew Noyes, a Facebook spokesman, said on Monday. Richard Arnes, a lawyer for the plaintiffs, did not immediately respond to a request for comment.

Facebook's "Sponsored Stories" were advertisements that appeared on a user's Facebook page when a friend "likes" an advertiser, including the friend's name and photograph. The suit claims that the paid post uses user's images and names to advertise products without compensation for advertising purposes in violation of California law.

Attorney Michael Rhodes representing Facebook said at a previous hearing that the parties couldn't come up with an acceptable algorithm to determine the value of a user's involuntary endorsement. Rhodes said the required disclosures and ability for parents to exclude their children from the feature as a result of the settlement are "unprecedented" for a social media website, and told the judge that he believes that it "has a significant benefit to the class."

The settlement terms have already caused one judge to recuse herself from the case, due to her involvement with charities slated to receive payment.

By Electronista Staff
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