Watchdogs Ask Court To Reject 'Sponsored Stories' Settlement

Facebook-Gavel-AFacebook's proposed $20 million settlement of a class-action lawsuit about “sponsored stories” would result in continued violations of laws protecting children's privacy, the advocacy group Public Citizen says in new court papers.

“The proposed settlement fails to remedy one of the core problems for which the plaintiff class is seeking relief: Facebook’s use of minors’ likenesses without the parental consent that is required by state law,” Public Citizen argues in a motion seeking to scuttle the settlement agreement.

“The proposed settlement itself would perpetuate and purport to authorize ongoing violations of the laws of multiple states by authorizing Facebook to continue using minors’ likenesses without parental consent.”

If approved by U.S. District Court Judge Richard Seeborg in the Northern District of California, the deal would resolve a class-action lawsuit alleging that Facebook's sponsored stories violates a California law about endorsements. That law says companies need people's permission before using their names or images in ads. In the case of minors, companies need parental consent. Facebook's sponsored stories program shows users' names and photos in ads to their friends.

The tentative deal requires Facebook to pay users up to $10 if they were previously featured in a "sponsored stories" ad. Facebook also will allow minors under 18 to opt out of appearing in all sponsored stories ads, and will give adult users a mechanism to control their appearance in future sponsored stories -- but only for two years, and on an advertiser-by-advertiser basis.

The agreement also calls for Facebook 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 would have to represent that at least one parent agrees.

Public Citizen argues that Facebook shouldn't be permitted to use childrens' names in ads -- even if they can opt out -- without more definitive proof that their parents have consented. “Accepting a minor’s representation that a parent has consented is not the same as actually obtaining the parent’s consent to those terms; on the contrary, it effectively dispenses with parental consent requirements by permitting a minor unilaterally to consent to the use of his or her image,” Public Citizen argues.

The group says that seven states, including California, prohibit the use of minors' names or images in ads without parental permission. “The agreement allows Facebook to create advertisements with images of users it knows to be minors without parental consent. Accordingly, the proposed settlement authorizes Facebook to violate the law of at least seven states,” the advocacy organization argues.

Public Citizen also argues that the deal doesn't provide an adequate remedy to adult users who were featured in sponsored stories ads. As currently structured, the agreement provides that Facebook will pay individual users up to $10 each if they were used in an ad, and submit a claim. If there are too many claims to pay people $10 each, they will receive a pro rata share.

But if the pro rata share drops to less than $5, the judge will decide whether each user should receive a small award, or earmark the entire amount for public interest organizations and law schools.

“The size of the settlement fund is so disproportionately small relative to the class size that it is unlikely that any class member will receive any compensation at all,” the group argues.

Public Citizen isn't the only organization to oppose the deal. The Children's Advocacy Institute at the University of San Diego's Center for Public Interest Law also says the deal should be nixed. That group says that children aren't likely to ever see the portion of the terms of use that requires parental permission, let alone ask their parents for consent to appear in ads.

The group also takes issue with the portion of the settlement that allows minors to opt out of appearing in sponsored stories. “The child will likely not see any of the obscure 'notices' and, therefore, virtually none will affirmatively 'opt out,'” it argues.

The law firm Center for Class Action Fairness also filed objections to the proposed deal. That organization says the proposed attorneys' fees are too high. The tentative settlement provides that class-action lawyers can apply for $7.5 million.

Seeborg granted the deal preliminary approval last December. He is expected to hold a hearing next month about whether to allow the agreement to be finalized.

Facebook declined to comment for this article.

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