Facebook settles Sponsored Stories lawsuit without disclosing terms

Facebook today settled a proposed class action lawsuit that contested how the site uses names and images of users in its Sponsored Stories ad product.

The plaintiffs of Fraley et al v. Facebook, Inc. asserted that the social network’s new ad type turns users into spokespeople, and thus entitles them to compensation under California law. The company did not share terms of the settlement in court documents and representatives did not offer comment on the case. Had Facebook not settled, it might have risked what it sees as a major component of its future advertising business.

Sponsored Stories, introduced in January 2011, allow advertisers pay to promote a user’s actions — such as Liking a page, playing a game or sharing a link — to their friends. However, California’s Right of Publicity Statute prohibits the use of another person’s name, voice, signature, photograph or likeness for advertising without a person’s consent. According to Reuters, Facebook claimed it was immune under the law’s “newsworthiness” exemption because the plaintiffs are considered public figures to their friends and their actions on the platform are generally newsworthy.

Some advertisers have found Sponsored Stories to have lower costs and higher clickthrough rates than Facebook’s traditional ads. Earlier this year Sponsored Stories became part of Facebook’s initial steps to monetize mobile usage with these ads now eligible to be shown within mobile News Feed. The company is also testing options for advertisers to create Sponsored Stories that promote Open Graph activity, including actions, such as what users watch, read or listen to. We’ve also seen the social network increase the size and design of Sponsored Stories within the desktop feed recently.

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3 Responses to “Facebook settles Sponsored Stories lawsuit without disclosing terms”

  1. Facebook Settles Class-Action Sponsored Stories Suit - AllFacebook says:

    [...] blog Inside Facebook reported the settlement, saying that the plaintiffs of Fraley et al v. Facebook (see below) based [...]

  2. This week’s headlines from across Inside Network says:

    [...] Facebook settles Sponsored Stories lawsuit without disclosing terms [...]

  3. Just Don't Do It: What the UK Nike Tweet Ban Means to You says:

    [...] of both the Fair Credit Reporting Act (FCRA) and for lack of disclosure by employees. Furthermore, Facebook settled a class action lawsuit for a lack of disclosure around its Sponsored Stories product by pledging to donate $10mm to [...]

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