Facebook's 'Sponsored Stories' Settlement Faces New Challenge

A Facebook user is appealing a judge's decision to accept Facebook's $20 million settlement of a class-action lawsuit about the sponsored stories program.

Jo Batman of Corpus Christi, Texas filed a notice of appeal with the 9th Circuit Court of Appeals this week. Batman hasn't yet made any arguments to the appeals court. But in May, Batman sent a letter to U.S. District Court Judge Richard Seeborg in the Northern District of California, unsuccessfully urging him to reject the deal.

Among other arguments, Batman said Facebook's promise to make some revisions to its sponsored stories ads didn't go far enough to remedy the potential problems with the program. Batman also specifically criticized Facebook's controversial plan to require teens under 18 to represent that a parent agrees to the service's terms.

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The $20 million settlement, approved several weeks ago by Seeborg, calls for Facebook to pay $15 to around 600,000 users who were featured in sponsored stories ads. The deal also requires Facebook to pay several million dollars to 14 nonprofits and schools, including the digital rights groups Center for Democracy and Technology and the Electronic Frontier Foundation.

The agreement resolves a class-action lawsuit filed by a group of consumers who alleged that Facebook's sponsored stories program violates a California law governing endorsements. That law provides that companies must 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.

The settlement also obligates Facebook to change some of the language in its terms of service to better reflect how the program operates. Facebook said in court papers that it would add language requiring minors to represent that their parents agreed to the terms of service -- including the use of their children's names and photos in sponsored stories ads.

The company also said it would clarify that people who “liked” products or services might have their names and images used in ads.

Batman wasn't the only one who objected to the settlement. Some watchdogs, including Public Citizen and The Children's Advocacy Institute at the University of San Diego's Center for Public Interest Law, also asked Seeborg to scuttle the deal.

The Children's Advocacy Institute specifically argued that children aren't likely to ever see the provision in the terms of use that requires parental permission -- let alone seek their parents' consent to appear in ads.

Shortly after Seeborg approved the settlement, Facebook unveiled its new terms of service. As expected, they require users under 18 to say their parents consent to the service's conditions. Several days later, a coalition of privacy groups -- who weren't involved in the lawsuit settlement -- said that Facebook's new terms violate its 2012 settlement with the Federal Trade Commission. In that matter, Facebook promised to obtain users' express consent before sharing their information more broadly than its privacy policy permitted at the time.

Sen. Ed Markey (D-Mass.) also asked the FTC to investigate Facebook's new terms -- especially the one requiring minors to represent that their parents consent to the service's conditions. Markey said in a letter to the agency that he is “particularly concerned about how the proposed changes could impact teenage users.”

He has asked the FTC to state whether it views the new terms as violating its 2012 settlement with Facebook.

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