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Monday, June 18, 2012

Facebook settles on $10 million payment for Sponsored Stores lawsuit

Posted by Jim Bernstein

If you are a Facebook user I’m sure you have seen those advertisements that have one of your friends names in it stating that they “like” that product or service and showing their profile picture next to the ad. These ads make a recommendation for that product or service from your friend but the catch is that your friend actually did not recommend the product or service. Plus your friend doesn’t get any compensation from the advertiser for them using their name and picture for the ad and they don’t even know that they are being used in this way.

Five California residents sued Facebook over this practice stating that it violates California law and the case was actually settled last month but just now made public. According to the lawsuit, this could have included one of every three Americans and could have been a huge payment for many people if more lawsuits were to follow. U.S. District Judge Lucy Koh found that Facebook's Sponsored Stories could cause "economic injury" by using friends' names, likenesses and pictures. She ordered a cy-pres settlement, meaning Facebook's $10 million would be sent to charity.

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