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Facebook payouts $10m to settle lawsuit

18 June 2012

The legal case against Facebook began last year, after users were annoyed about their faces being used as part of Facebook’s ‘sponsored stories’ – which allow brands to use the photos and names of people who have ‘liked’ their brand in their adverts on the social network.

The social network have settled the proposed class action lawsuit and has now agreed a compensation figure.

Facebook has agreed to pay out $10m to settle the suit, but the type of settlement means the payment will go to charity as opposed to the individuals who brought the case in the first place. However a judge still needs to approve the settlement.

In a BBC documentary about Facebook last year, presenter Emily Maitlis asked Elliot Schrage, Facebook’s head of global communications, about this type of activity on the site.

He stated that by people clicking the ‘like’ button on brands’ Facebook pages, was them effectively giving their permission for their name to be allied to that company and endorsing it in a sponsored story or advert.

In the suit, Mark Zuckerberg, the site’s 28 year-old founder and chief, was quoted as saying a trust referral by a user was the ‘Holy Grail’ of advertising.

The case is the first one of its kind to have made any progress in the courts. Previous cases have been thrown out or have failed. It may mean thousands of other Facebook users could advance similar cases.

However, if the case had succeeded, rather than being settled, consumer rights groups had hoped it could mean a major change as to how Facebook makes money out of marketing brands.

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