A coalition of parents is asking the 9th Circuit Court of Appeals to reject Facebook's “unpersuasive” attempts to defend a $20 million settlement of a lawsuit about the sponsored stories program.
The parents say the settlement -- approved last year by U.S. District Court Judge Richard Seeborg -- will enable Facebook to violate state laws restricting companies from using minors' name and images in ads. “The existence of not just one but seven state laws that expressly prohibit what the district court has authorized Facebook to do underscores the broad reach of the decision below and the gravity of the court’s error in approving the settlement,” the parents argue in papers filed on Friday with the 9th Circuit Court of Appeals.
The settlement resolved a class-action lawsuit alleging that Facebook's sponsored stories violates a California law about endorsements. That law requires companies to obtain adults' permission before using their names or images in ads. When minors' names or images are used in ads, companies must obtain parental consent.
Facebook recently stopped selling “sponsored stories” ads, but now allows marketers to show people's likes to their friends, next to ads.
The lawsuit centered on California's law, but six other states also prohibit companies from using minors' name and images in ads without obtaining permission from parents.
The deal that was approved requires Facebook to pay $15 each to around 600,000 users who were featured in “sponsored stories” -- ads featuring users' names and images and shown to their friends. The settlement also calls for Facebook to pay several million dollars to various nonprofits and organizations.
Facebook also agreed to revise its terms of service so that users state they give permission for their names and photos to be shown in ads. Users under 18 must represent that at least one parent agrees.
Various critics, including a group of parents, are now asking the 9th Circuit Court of Appeals to vacate the settlement. The parents argue that the terms authorize Facebook to continue violating various state laws aimed at protecting minors' privacy.
Facebook has asked the 9th Circuit to let the settlement stand. The company argued in court papers filed in June that the deal is a legitimate compromise, especially given that there was never any finding that Facebook violated California's endorsement law. The social-networking service also argues that teens have a free-speech right to endorse brands.
The parents are urging the 9th Circuit to reject that stance. “Facebook’s argument ultimately boils down to the notion that the settlement may authorize Facebook to violate the seven state privacy statutes because Facebook’s minor users have a First Amendment right to consent to the use of their names and images in commercial advertising without regard to the wishes of their parents,” the parents argue. “Facebook cites no authority for this dramatic proposition, which runs entirely counter to more than a century of law recognizing that minors generally lack capacity to enter into significant commercial relationships without parental consent.”