Lawyers Run The World Facebook to Pay $20 million and Amend its Terms...

Facebook to Pay $20 million and Amend its Terms of Service


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An agreement requiring Facebook Inc. to pay $20 million and amend its terms of service to give users more control over use of their names and likenesses as part of its “Sponsored Stories” advertising program was approval on Monday by the U.S. District Court for the Northern District of California.

The Sponsored Stories feature combined a user’s name and photograph with an advertiser’s logo, along with a statement that the user “liked” the company.  The Plaintiffs asserted that “liking” the product or service was not tantamount to consent to use profile photos for marketing purposes.

The court considered the enormous size of the potential class and direct payment issues.  Residual funds remaining after direct payments and attorneys’ fees are disbursed will be held for the benefit of consumer protection and online privacy organizations.

The settlement notwithstanding, it remains unclear whether the plaintiffs could show they were harmed in a meaningful way.  The court believed that there was a  “substantial hurdle” to proving a lack of consent on the part of plaintiffs, noting that Facebook argued that its users chose to indicate on Facebook that they liked certain entities or activities.

In the settlement agreement, Facebook agreed to provide greater disclosure and transparency regarding how names and profile pictures will be used and provide “additional control” over the program.  However, concerns exist regarding proposed changes to Facebook’s Statement of Rights and Responsibilities and many believe that this should have put an end to the Sponsored Stories program, or mandated opt-in participation.  It is presently an opt-out program.

The court stated that “the implication underlying many of the arguments is that any imposition on the privacy interests of Facebook members is per se wrongful.”  The court ultimately cited Facebook’s position that the service is meant as “a platform for sharing information,” that users join voluntarily and that, despite costing the company millions of dollars to provide, its services are free.

“While it does not follow that Facebook has carte blanche to exploit material belonging to, or regarding, its members in any fashion whatsoever,” the court said, “neither is it foreclosed from adopting a Statement of Rights and Responsibilities that is not as “pro privacy” as some may prefer.”

Amongst the most aggressively argued objections to the settlement related to perceived flaws regarding the protection of minors.  Specifically, arguments were advanced that the agreement should have required parental consent prior to a minor’s name and likeness could be used in the program.  The court believed that even if state law imposes a parental consent requirement for minors older than thirteen, the federal Children’s Online Privacy Protection Act may preempt such a requirement.  COPPA’s express preemption provision, coupled with its decision to require parental consent only for children younger than thirteen, could bar any attempt to impose a parental consent requirement for teenagers upon Facebook.

Richard B. Newman
Richard B. Newman is an Internet Lawyer at Hinch Newman LLP focusing on advertising law, Internet marketing compliance, regulatory defense and digital media matters. His practice involves conducting legal compliance reviews of advertising campaigns across all media channels, regularly representing clients in high-profile investigative proceedings and enforcement actions brought by the Federal Trade Commission and state attorneys general throughout the country, advertising and marketing litigation, advising on email and telemarketing best practice protocol implementation, counseling on eCommerce guidelines and promotional marketing programs, and negotiating and drafting legal agreements.


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