{"id":1909,"date":"2013-09-12T11:00:30","date_gmt":"2013-09-12T11:00:30","guid":{"rendered":"http:\/\/ncjolt.org\/?p=1909"},"modified":"2020-06-04T20:54:00","modified_gmt":"2020-06-04T20:54:00","slug":"facebook-sponsored-stories-settlement-the-cost-of-doing-business","status":"publish","type":"post","link":"https:\/\/journals.law.unc.edu\/ncjolt\/blogs\/facebook-sponsored-stories-settlement-the-cost-of-doing-business\/","title":{"rendered":"Facebook Sponsored Stories Settlement: The Cost of Doing Business"},"content":{"rendered":"

Thursday, September 12, 2013, by David Fitzgerald
\nUS District Judge Richard Seeborg<\/a> approved a settlement<\/a> last week between Facebook and 614,000 members of a class action suit originally filed in 2011. The crux of the lawsuit<\/a> stemmed from Facebook\u2019s alleged misuse of its users\u2019 personal information\u2014including \u201cnames, photographs, likenesses, and identities\u201d\u2014 without consent in generating advertising sales known as \u201cSponsored Stories<\/a>.\u201d\u00a0 \u201cSponsored Stories<\/a> are a form of advertising that typically contain posts which appear on facebook.com about or from a Facebook user or entity that a business, organization, or individual has paid to promote so there is a better chance that the posts will be seen by the user or entity\u2019s chosen audience.\u201d
\nThe main contention of the plaintiffs was that the unapproved use of their personal information under the Sponsored Stories scheme violated California Civil Code \u00a7 3344<\/a> governing the use of another\u2019s likeness for solicitation purposes.\u00a0 Facebook is no stranger to privacy litigation.\u00a0 In 2009, it was forced to abandon its Beacon advertising system<\/a> after it was found to have violated the Electronic Communications Privacy Act<\/a> among a host of other laws.\u00a0 Other social networking sites<\/a>, like tagged.com<\/a>, have fared no better when implementing deceptive marketing strategies.\u00a0 With this historical backdrop, it is easy to see why Facebook would settle rather than face declaratory judgment on its use of Sponsored Stories.\u00a0 But what has Facebook really surrendered in the present settlement?
\nFacebook essentially agreed to three primary forms of relief<\/a> in its settlement agreement.\u00a0 First, it agreed to pay $20 million dollars into a fund to pay claims of Class Members who appeared in a Sponsored Story.\u00a0 This may sound like a large sum.\u00a0 Considering Reuters estimates<\/a> Facebook garnered $234 million from Sponsored Stories advertising in just over 18 months, however, $20 million (or around $15 per Class Member) seems like a pretty good deal for Facebook.\u00a0 It represents less than 9% of the revenues from this particular advertising scheme.<\/p>\n

Facebook\u2019s settlement agreement looks less like a \u201cfair, reasonable and adequate relief to the class,\u201d than it does a shrewd understanding that such settlements may simply be a cost of doing business.<\/p><\/blockquote>\n

Next, Facebook agreed to revise its terms of service (known as the \u201cStatement of Rights and Responsibilities<\/a>\u201d) to more fully explain the instances in which Class Members agree to the display of their names and profile pictures in connection with Sponsored Stories.\u00a0 This may be a calculated move by Facebook relying, in large part, on the apathy of its users.\u00a0 Facebook\u2019s continued dominance of the social networking market combined with the fact that only 614,000 of over 150 million<\/a> (just .4%) users potentially affected by the Sponsored Stories elected to join the suit makes it unlikely that the revised privacy statement will have any real effect in altering members\u2019 online behavior.
\nLast, Facebook agreed to provide parents and guardians of minor users with a more thorough explanation<\/a> of Facebook\u2019s advertising policy<\/a>.\u00a0 This of course requires the parents to also be Facebook users (who are in turn subject to Sponsored Stories).\u00a0 If the minor indicates his parents are not on Facebook, then the website will make the minor ineligible to appear in Sponsored Stories until he or she reaches the age of 18 (or until the parent joins FB and a family relationship online is established).\u00a0 This requires the minor to take the affirmative action of actually indicating his parents are not Facebook users in his or her privacy settings.\u00a0 Given the statistical apathy toward advertising policies of adult Facebook users cited above, and advertisers\u2019 awareness of the modern buying power of children<\/a>, this still bodes well for Facebook\u2019s bottom line.
\nSome online privacy watchdog groups<\/a> have decried the reworded Statement of Rights and Responsibilities as actually giving Facebook more<\/i> latitude in using the names and likenesses of its member than the one giving rise to the current settlement.\u00a0 The new version<\/a> states Facebook users \u201cpermit a business or other entity to pay us to display your name and\/or profile picture with your content or information, without any compensation to you.\u201d\u00a0 Contrast that disclaimer with the old version that advised user privacy setting could \u201climit how your name and profile picture may be associated with commercial, sponsored, or related content.\u201d
\nThe targeting of minors<\/a> is of particular concern to such privacy advocates.\u00a0 Some states, like California<\/a>, require nonfinancial businesses to disclose what personal user information is sold to third parties even for adult users.\u00a0 Other states, Minnesota and Nevada<\/a> among them, have already taken statutory action placing the burden of affirmative steps for permission on the online service provider rather than allowing presumed consent by use.\u00a0 The Facebook settlement concession pertaining to minor users allows Facebook to presume parental consent<\/a> for the commercial exploitation of their children\u2019s online profiles.\u00a0 A joint letter<\/a> from the nation\u2019s six largest privacy watchdog\u2019s to the FTC says the reworded privacy statement \u201ceviscerates any meaningful limits over the commercial exploitation of the images and names of young Facebook users.\u201d
\nThe current scope and deterrent effect of the Electronic Communications Privacy Act are policy questions that go beyond the scope of this post.\u00a0 However, Facebook\u2019s continued use of marketing practices that push the envelope of acceptability under the ECPA seems likely.\u00a0 Despite a history of legal issues surrounding its advertising tactics, Facebook has emerged from yet another round of privacy litigation with a relative \u201cslap on the wrist.\u201d\u00a0 Even after payment of the settlement agreement, Facebook will net an estimated $214 million in advertising revenues from its \u201cSponsored Stories.\u201d\u00a0 Moreover, Facebook has admitted no wrong-doing and will be allowed to continue this practice with only minor (and arguably advantageous) concessions.
\nIn light of these facts, Facebook\u2019s settlement agreement looks less like a \u201cfair, reasonable and adequate relief to the class<\/a>,\u201d than it does a shrewd understanding that such settlements may simply be a cost of doing business.
\n 
\n <\/p>\n","protected":false},"excerpt":{"rendered":"

Thursday, September 12, 2013, by David Fitzgerald US District Judge Richard Seeborg approved a settlement last week between Facebook and 614,000 members of a class action suit originally filed in 2011. The crux of the lawsuit stemmed from Facebook\u2019s alleged misuse of its users\u2019 personal information\u2014including \u201cnames, photographs, likenesses, and identities\u201d\u2014 without consent in generating …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[51],"tags":[],"_links":{"self":[{"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/posts\/1909"}],"collection":[{"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/comments?post=1909"}],"version-history":[{"count":1,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/posts\/1909\/revisions"}],"predecessor-version":[{"id":7584,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/posts\/1909\/revisions\/7584"}],"wp:attachment":[{"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/media?parent=1909"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/categories?post=1909"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/tags?post=1909"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}