Facebook tries again to settle “Sponsored Stories” suit

Facebook’s trying again to resolve a lingering privacy lawsuit filed by unhappy users.

After a judge threw out the last proposed settlement, Facebook has revised its offer to resolve the so-called “Fraley” suit, filed last year on behalf of individuals who were unhappy over the social network’s use of their names and photos in so-called “sponsored stories” advertisements.

Those are ads in which companies pay to inform a Facebook user’s friends when that user has “liked” a particular brand or product.  Facebook has boasted that such recommendations are highly effective as advertisements.  But some people weren’t happy to find their names and pictures being used in that fashion.  They filed a class action suit in federal court, seeking compensation and more control over future ads.

The new settlement proposal, outlined in court documents filed over the weekend, would set aside a pool of $20 million and let individuals claim damages of $10 each.  Any left-over funds would be divided among several non-profit tech organizations.

In addition to those cash payments, under the proposed settlement, Facebook says it will add a more explicit disclaimer to its terms of service, explaining that all users are giving Facebook the right to feature their names, profile pictures and other information in commercial messages.  Facebook is also promising to create a new feature that lets users see how their names and interactions — such as their “likes” — have been used in “sponsored stories,” and to control how that information will be used in future ads.

An earlier proposal for settling the case would not have provided any payments to individuals.  Instead, it set aside $10 million for nonprofits and provided $10 million for the attorneys who brought the suit. Those attorneys had agreed to that plan, but a federal judge had rejected it after some consumer groups complained that it provided a rich pay-out for the lawyers while not doing enough for individual Facebook users.  Critics noted, for example,  that the proposed user controls, which are relatively unchanged from the first settlement draft, don’t give users any control until after Facebook has used their names and likenesses.

Attorneys on both sides of the suit have signed off on the new plan, but it still must be approved by the judge. It will be reviewed by U.S. Judge Richard Seeborg in a hearing at the San Francisco federal court on Oct. 25.

Brandon Bailey (143 Posts)

Brandon Bailey covers Google, Facebook and Yahoo for the San Jose Mercury News, reporting on the business and culture of the Internet.