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Facebook Settles 'Sponsored Stories' Suit For $10M To Charity

Posted by timothy on from the straight-to-the-hemlock-society-and-nambla dept.

Reuters reports that Facebook has taken the face-saving move (and a cheap one, considering the company's market cap) of settling for $10 million — plus lawyers' fees — the lawsuit brought against it for appropriating users' names and pictures in deceptive ads. Says the linked story: "The lawsuit, brought by five Facebook members, alleged the social networking site violated California law by publicizing users' 'likes' of certain advertisers on its 'Sponsored Stories' feature without paying them or giving them a way to opt out, the documents said. A 'Sponsored Story' is an advertisement that appears on a member's Facebook page and generally consists of another friend's name, profile picture and an assertion that the person 'likes' the advertiser."

34 comments

  1. charity says by Anonymous Coward · · Score: 0

    LIKE

  2. Does this work for people, or just companies? by Anonymous Coward · · Score: 5, Funny

    Dear David,

    Sorry I told all my friends you were gay without asking you if it was okay first. If you were upset by that, I apologize. In order to show my sincerity and to help make amends, I will donate $20 to a charity. In addition, I promise that I will never again betray someone's trust by outing someone's sexuality at one of Mary's barbecues. I will do my best to find another way instead.

    Sincerely,

    Anthony

    1. Re:Does this work for people, or just companies? by Anonymous Coward · · Score: 1

      Hey Tony!
      I appreciate the sentiment but all I really did was accept a free blowjob at a barbeque. Maybe I had too many beers, but I'll still man up and say Thank You once again. Your alleged first time deep throating was masterful, like you'd been doing it for years! And I'm not admitting to being gay, but it was kind of hot that you both swallowed and then did a clean up suck and lick on my junk.
      Your Jizz donor,
      Dave

    2. Re:Does this work for people, or just companies? by ArsenneLupin · · Score: 3, Insightful
      Why has this been modded as funny rather than insightful?

      This is the perfect way how this "sponsored stories" misfeature may backfire. Closeted gay person likes an ad about an anal dildo or a new gay bathhouse in town. Next day, the ad shows up on all his straight friends' and work colleagues' profiles with his name attached...

    3. Re:Does this work for people, or just companies? by Anonymous Coward · · Score: 0

      I think you mean "Next second, the like shows up on his wall and everyone instantly knows he is gay" for 99.9% of people.

    4. Re:Does this work for people, or just companies? by ArsenneLupin · · Score: 1

      Actually, "likes" themselves are relatively discreet, don't show up near the top of the page, and can be hidden (if the poster is aware of them). Well these ads can probably be hidden too, but given that they were a new feature, many people were probably not aware that they even existed before it was too late.

    5. Re:Does this work for people, or just companies? by s0nicfreak · · Score: 1

      Why the fuck would you "like" anal dildos at all, other than for a joke?

    6. Re:Does this work for people, or just companies? by Anonymous Coward · · Score: 0

      You'd still be pretty dumb to assume that things you Like on Facebook will always be private and that the filters won't change. The only way to ensure that something like what you described does not happen is to either not be gay or not like gay things online. There's no reason to "Like" on Facebook other than show other people (which may include the thing you are liking).

  3. Re:Ironic by arisvega · · Score: 2

    Maybe someone should file a class action suit against slashdot.

    Sorry, it only works with real money.

    --
    The three laws of thermodynamics:(1) You can't win. (2) You can't break even. (3) You can't even quit.
  4. charity? by Anonymous Coward · · Score: 0

    Why don't the lawyers work for charity, too?

  5. That explains it by UnknowingFool · · Score: 4, Interesting

    Just last month one of my high schoolmates "liked" a company suddenly out of the blue after a period of inactivity. The problem was my schoolmate died a month earlier. I haven't talked to his parents but I'm sure they were pissed.

    --
    Well, there's spam egg sausage and spam, that's not got much spam in it.
    1. Re:That explains it by McGruber · · Score: 1, Funny

      Just last month one of my high schoolmates "liked" a company suddenly out of the blue after a period of inactivity. The problem was my schoolmate died a month earlier.

      Maybe he liked his coffin?

    2. Re:That explains it by davester666 · · Score: 2

      Yes. Plenty of room to turn over. With a little more practice, he will be able to spin...

      --
      Sleep your way to a whiter smile...date a dentist!
  6. So do they have control over usage in ads now? by game+kid · · Score: 1

    So do the users have control over usage in Facebook ads now? If not, Facebook won big. Even if so, Facebook has inspired a whole bunch of "social" marketers.

    Ick.

    --
    You can hold down the "B" button for continuous firing.
  7. Class-y Action by Pandare · · Score: 5, Interesting

    As someone who is procrastinating from studying for the bar, I have to say that the key phrase here is "lawyer's fees." Once those words have been invoked, there's no real incentive for the lawyers to look out for the class member's interests anymore. These massive class actions are usually miserable for the class members, but great for the attorneys who take the case.

    As far as what should have been done, giving every facebook user their share would be difficult, but I don't see why they couldn't have come to an agreement to run something like youtube's partnership program and give people who bring in a lot of business for their advertisers a kickback. Everybody else could be given a farmville cow or something (I have no idea what the new big shitty gam^H^H^H data-mining project is).

    Anybody know which charity the money is going to? EFF sounds like a fine choice.

    1. Re:Class-y Action by Anonymous Coward · · Score: 1

      There should be a Federal surtax on court ordered judgements or court approved settlements from class action suits in which the typical claimant receives less than $100 or so. I'm tired of all these suits that only benefit the lawyers.

    2. Re:Class-y Action by Anonymous Coward · · Score: 0

      From where do you get the idea that a class action suit is supposed to result in gains for individual "claimaints"?

      The "class" in a class action suit only exists for the purposes of convenience to make it possible to leverage a significant amount of pressure on the company in question rather than requiring each user to litigate individually, which would be a time-consuming and ultimately fruitless course of action for the relatively minor benefits you'd receive in most cases.

      If you are unhappy on the profits from your zero-effort participation in a class action, feel free to exclude yourself from the case and file your own suit. In small claims, you don't even have to worry about attorney's fees.

    3. Re:Class-y Action by Anonymous Coward · · Score: 0

      If you are unhappy on the profits from your zero-effort participation in a class action, feel free to exclude yourself from the case and file your own suit.

      The ambulance chasing lawyers are taking advantage of the real claimants to obtain fat paydays, better than what highly skilled software engineers working 60 hour weeks typically earn for example. In this present case, $10 million is a slap on the wrist as far as Facebook is concerned. They probably welcome it because it effectively closes the book on the matter of their wrongdoing.

      When this happens to me (not this time because I don't use Facebook), I feel like I've been screwed twice - first by the company I did business with, and second by the lawyers extracting their fees.

    4. Re:Class-y Action by jblb · · Score: 2

      Anybody know which charity the money is going to? EFF sounds like a fine choice.

      And anyone know which charity the lawyers are donating their fee to?

    5. Re:Class-y Action by pepty · · Score: 4, Interesting
      I can't say as the Republican ideas for reforming class action lawsuits are very useful; here's my list:

      1. Strict limit on fees: the class gets a minimum of 65% of the reward. All costs(distribution, printing, whatever) not earmarked by the judge come out of the lawyers 35%.

      2. Strict parity in payments, in both kind and time.

      Kind: The only way the lawyers get paid in cash is if the class is paid in cash. If the class gets $650,000 in coupons, the lawyers are paid $350,000 in identical coupons. They're welcome to sell the coupons on ebay.

      Time: As in the time value of money. At no point during the payout are the lawyers paid their fees in advance of the class being paid their settlement. If a trust is established to pay out claims over a period of years (typical for medical lawsuits), the lawyers get paid incrementally as the claims are paid. If the lawyers wish to be paid up front they can securitize their revenue stream from the trust and sell it. They may get 60 cents on the dollar for it.

    6. Re:Class-y Action by Anonymous Coward · · Score: 0

      And anyone know which charity the lawyers are donating their fee to?

      lol

      Reminds me of a similar question about Wall Street brokerage.

    7. Re:Class-y Action by Anonymous Coward · · Score: 0

      The ambulance chasing lawyers are taking advantage of the real claimants to obtain fat paydays,

      There are no "real claimants" in a class action. The only meaningful party is the targeted company, motivated by a large legal team to change its behavior or correct an unmitigated problem. Financial penalties are only one tool to do so and not the primary purpose of a class action suit. If you are injured in some way by a company's action, you have the option of suing them directly as an individual or seeking certification as a class for a class action. The latter is more expensive, riskier, and incredibly labor intensive in comparison, but carries more weight if it's successful.

      Again I ask: from where did you get the idea that the point was for you (or anyone else) to profit individually?

      In this present case, $10 million is a slap on the wrist as far as Facebook is concerned.

      Which is why they settled it. Going to trial could cost them a lot more, and the primary goal of the class representation was to have Facebook change its practices. The settlement cash is just a nice bonus.

      As for this:

      better than what highly skilled software engineers working 60 hour weeks typically earn for example.

      What does that have to do with anything?

    8. Re:Class-y Action by N1AK · · Score: 1

      I know the existence of class action suits has benefits but there seem to be so many downsides that I have to hope there's another way. We don't have a real equivalent in the UK and it doesn't feel like we miss it (although it is generally much less risky for an individual to get involved in a lawsuit against a large business in Europe).

      Surely it would make most sense for the lawyer bringing a class action suit to be responsible for contacting the people covered by it and then following their wishes. If a lawyer can only get agreement from 50% of members then if 25% refused the terms he is offered they should be excluded from the action (but still free to start their own) and the other 25% who weren't found and/or didn't respond should either also not be included or transfer their stake to the government. Finally, a settlement should have to be agreed by the class action members. Personally I'd only, and happily, accept donating from charity if the lawyers waived their fee or donated as well. There's no way most people would be happy if they knew a lawyer was getting rich by agreeing to give their settlement away!

    9. Re:Class-y Action by ArsenneLupin · · Score: 1

      Surely it would make most sense for the lawyer bringing a class action suit to be responsible for contacting the people covered by it and then following their wishes.

      Actually, they do, if they have contact info. Case in point: I've lost some money on the stock market during the dot com bubble, and in the years after the crash, I occasionally got letters from lawyers organizing class action suits on behalf of the people that lost out. In these letters, I was proposed the option to participate or to exclude myself from the class. Payments were in cash too, rather than coupons (though much smaller than the amounts lost).

      But I guess, a similar course of action might be difficult in cases where the identity of the harmed parties is not easily known.

    10. Re:Class-y Action by N1AK · · Score: 1

      Thanks for the response. The only communications I have seen regarding class actions suits tend to be based on including people by default (ie you can opt out if you take action). Personally I think that should be opt-in. That gives the lawyers more incentive to find people and to make them an offer they are interested in.

    11. Re:Class-y Action by pepty · · Score: 1

      Payments were in cash too, rather than coupons (though much smaller than the amounts lost).

      But I guess, a similar course of action might be difficult in cases where the identity of the harmed parties is not easily known.

      Coupon/rebate settlements are more likely in consumer product lawsuits (we made a lousy product; here's 30% off buying another). They tend to create several kinds of abuse. For one thing, coupons aren't worth their face value in cash - they typically sell for a small percentage of their face value. For another, few of the coupons are ever actually exercised. If Lawyers are paid in cash while the class gets paid in coupons, it's easy for the value of the lawyers' share of the settlement to be several times that of the class's share. Defendants like the settlements because they're inexpensive (payouts are stretched out over time and proportional to people buying more of the product). Lawyers like the settlements because companies will roll over for them quickly compared to cash settlements. Judges have been cracking down on the worst of the abuses though.

      For class action suits by investors - remember when companies were screaming about lawyers like Bill Lerach manufacturing stockholder lawsuits out of thin air? They finally nailed him for manipulating lead claimants in the class action lawsuits he filed, but it turned out that the stock option fraud (back dating and revaluing for high level execs), securities fraud, and insider trading fraud he was bringing suit against was endemic both during and after the dot.com boom.

    12. Re:Class-y Action by JDG1980 · · Score: 1

      I know the existence of class action suits has benefits but there seem to be so many downsides that I have to hope there's another way.

      There is another way: government regulation. That's what is done in most of Europe. The reason why we have so many class action lawsuits in the US is that American regulations and regulators are so toothless. Without class actions, companies would be free to commit a whole bunch of injustices that are too small to sue for individually, but add up to big profits in the aggregate. With class actions, the money mostly goes to the lawyers, but at least the companies have to shell out the money and don't get to keep their ill-gotten gains.

  8. Would love to know... by Anonymous Coward · · Score: 3, Interesting

    What charities are receiving the said money and then who owns them.

    1. Re:Would love to know... by Anonymous Coward · · Score: 0

      the Zuckerberg foundation

    2. Re:Would love to know... by cyclebiff · · Score: 3, Funny

      Zuckerberg Center For Children Who Can't Finish College Good And Wanna Learn To Do Other Stuff Good Too

    3. Re:Would love to know... by RivenAleem · · Score: 2

      Saw the design plans for that place, looked a bit small tbh. Need to make it at least 3 times bigger.

  9. Ignorance in Summary by Anonymous Coward · · Score: 0

    Market Cap has nothing to do with how much cash a company has on hand to pay things like settlements, nor does it have much to do with the financial health of the company.

    Market Cap is simply the perceived value of the outstanding traded shares. It's based solely on what market traders think the company is worth.

    There are tons of companies out there who are deep in debt and have almost no cash that still have very high market capitalization.

  10. Facebook Valuation by Anonymous Coward · · Score: 0

    This is an interesting article and a very contentious subject. Questions were also asked here (http://www.abhirdayaram.com/2012/05/16/facebooks-big-dilemma/) as to the site justifies its valuation.