Facebook Settles Out Of Court Over Sponsored Stories
May 23, 2012

Facebook Settles Out Of Court Over Sponsored Stories

Facebook has avoided possibly billions of dollars in fines after it settled a “sponsored stories” lawsuit. In the shadow of Facebook´s troubled IPO last Friday, the company will need to begin making more thoughtful decisions on business matters.

The “sponsored stories” service launched in early 2011 and lets brands pay to retransmit users´ activities to their friends´ pages.

Facebook was accused in the complaint, of appropriating the names, photographs and identities of users to advertise products without their permission. The company´s “sponsored stories” were a “misleading advertising scheme” using material posted by Facebook members on their profile pages.

For example, if someone clicks the “like” button for a certain brand, this activity might show up as a “sponsored story” on their friends´ pages. Lawyers for Facebook and the plaintiffs said in a court filing Monday that they have reached a “settlement in principle,” although the terms of the settlement were not listed.

The settlement will almost certainly be less expensive than dragging the case through court. If it had become a class-action suit, it could have included the nearly one-third of the US members that are on the social network, reports Joel Rosenblatt for Bloomberg.

Facebook doesn´t need another high profile problem at this time as a possible SEC investigation may be underway following questions regarding its IPO and possible insider trading concerns.