US District Judge Richard Seeborg said he has “significant concerns” about a proposed legal settlement with Facebook accusing the social media site of violating the rights of its members through the “sponsored stories” feature. Facebook is slated to pay $20 million to lawyers and charities as part of the settlement. In an effort to convince the judge that the package is a good value for the plaintiffs, Facebook attorneys claim that the settlement payout plus changes to privacy settings represent $123 million in value to the suing class and Facebook users.
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.
The settlement forces Facebook to revise its terms of service to allow members to control what information can be used in “Sponsored Stories,” or letting the user opt out completely. Additionally, $10 million will be paid to 15 different consumer privacy advocating charities.
The proposed settlement must be approved by Seeborg, and he questioned why the members of the class-action are not entitled to recover any money from Facebook. Attorney Michael Rhodes representing Facebook said 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. A final decision from Judge Seeborg isn’t expected for several months, and may not be completed until 2013.