Facebook Sponsored Stories Settlement Approved
December 5, 2012

Facebook ‘Sponsored Stories’ Settlement Gets Initial Approval

Michael Harper for redOrbit.com — Your Universe Online

A judge has awarded Facebook a preliminary approval of their proposed settlement to dodge a potential class action lawsuit from their users. In this new settlement, Facebook will agree to pay out $10 to each user who has complained about seeing their name and picture on advertisements without their consent. U.S. District Judge Richard Seeborg announced earlier last month that he´d consider Facebook´s latest proposal to avoid such a suit. 

In this latest settlement, Facebook has agreed to pay out $20 million to those users who filed a complaint about the company using their identity in Sponsored Stories. Assuming that if only 2 million people file such a complaint, Facebook will have enough money to pay out $10 to each person. However, if more than 2 million users want financial restitution from Facebook, (and more than 2 million likely will) they will begin cutting down the payments to each user. Should the amount per person drop below $5, however, Facebook has said they will choose instead to donate the entire $20 million to charity rather than dole out $2.25 or so to each user.

"The Settlement Agreement appears to be the product of serious, informed, non-collusive negotiations and falls within the range of possible approval as fair, reasonable, and adequate," wrote Judge Seeborg in his ruling.

Judge Lucy Koh of Apple v. Samsung fame was set to accept an earlier settlement proposal from Facebook in July but backed out at the last minute. Judge Seeborg then stepped in and rejected Facebook´s proposed settlement.

In the original settlement, Facebook had proposed to pay out $20 million, but rather than pay it out to their users, they wanted to pay $10 million to the lawyers representing the users and another $10 million to charity. Judge Seeborg is now satisfied with Facebook´s proposal, writing in Monday´s ruling: “The court is satisfied that the revisions to the terms of the settlement are sufficient to warrant preliminary approval under the applicable standards.”

While Facebook has dressed up their settlement to get the preliminarily approval of the judge, it´s likely they´ll walk away from the situation giving no money to their users, writing a larger check to non-profits instead.

The class action suit brought against Facebook for their Sponsored Stories represents 100 million users. If more than 4 million users decide to fill out a form to receive $10 from Facebook and walk away from a potential lawsuit, the social giant will escape the public ridicule of writing checks to their users. Instead, they will be able to add $20 million to their tab of donations to non-profit advocacy groups.

The lawyers will still receive an unspecified cut from this $20 million, however. These lawyers will have to make a motion in order to earn their fees from the settlement.

The Menlo Park company has also said they will update their terms of usage agreement, making it easier for users to know when they´re being used to sell a product on behalf of Facebook.

Now that this settlement has received its preliminary approval, the next step for Facebook is to appear in a “fairness hearing” wherein those with objections to the settlement will be allowed to air their grievances.

This hearing is currently scheduled for June 2013.