Judge approves $20 million Facebook fund to settle advertising suit

A U.S. judge has put a stamp of approval on a US$20 million fund for Facebook to settle a class-action advertising suit, despite objections from groups representing minors on the site.

The ruling was issued Monday in the U.S. District Court for the Northern District of California. The class-action suit, which was first filed in 2011, challenged Facebook’s “sponsored stories” advertising program. A sponsored story is a type of promoted post appearing in users’ feeds that may include the profile name and picture of Facebook members who have “liked” that advertiser’s products or services.

The proposed settlement class includes roughly 150 million Facebook users whose names or likenesses were allegedly misappropriated to promote those products and services, the ruling said. Facebook has more than 1 billion users total.

The fund is to be distributed in cash payments of $15 each to Facebook members who submitted valid claims, the ruling said. Settlement administrative expenses, attorney fees and costs, and incentive awards will also be paid for through the fund, according to the ruling.

The ruling also requires the social network to make changes to its Statement of Rights and Responsibilities to give users better information about, and control over, how their names and likenesses are used in connection with sponsored stories.

The original settlement agreement proposed by the parties did not win preliminary approval, the ruling noted.

In the lead-up to Monday’s ruling, plaintiff groups had argued that the proposed settlement had violated laws in seven states requiring parental consent for use of a child’s likeness.

Public Citizen, a consumer advocacy group that represented six parents in the case, had argued that Facebook does not seek the consent of members to use their images for advertising, or parental consent when the users are children.

Those arguments — that the settlement does not appropriately handle issues related to minors — were among the most vigorously advanced objections, Monday’s ruling acknowledged.

“The record leaves no doubt that this settlement was the product of arms-length negotiations and compromise,” the ruling said.

Still, although the monetary relief to each class member is small and the percentage of class members who submitted a claim is limited, “the settlement as a whole provides fair, reasonable and adequate relief to the class,” the ruling said.

In a statement, a Facebook spokeswoman said the company was “pleased” that the settlement had received final approval.

Public Citizen said it was disappointed by Monday’s decision. The ruling “gave short shrift to kids’ online privacy rights and will enable Facebook to continue exploiting minors’ images for profit in violation of the laws of seven states,” said Scott Michelman, a staff attorney with the Washington, D.C.-based group.

Public Citizen has identified the seven states as California, Florida, Tennessee, Virginia, Wisconsin, New York and Oklahoma.