The legal case against Facebook began last year, after five users were annoyed about their faces being used as part of Facebook’s ‘sponsored stories’ – which allow companies to use the photos and names of people who have ‘liked’ their brand in their adverts on the social network.
As part of the $10m (£6m) settlement the social network agreed to in order for the case to be dropped, Facebook will allow users the chance to opt out of their profiles being used in these adverts for at least the next two years.
An economist hired by the plaintiffs calculated that this change to the social network's terms could cost Facebook approximately $103m (£66m).
The social network, which is struggling to retain its huge valuation post its recent flotation, settled the proposed class action lawsuit last month and has now agreed the changes to its terms and to seek additional consent from parents of users under the age of 18 to have their names used in sponsored stories.
The settlement rules: “Facebook will create an easily accessible mechanism that enables users to view the subset of their interactions and other content that have been displayed in Sponsored Stories. Facebook will further engineer settings to enable users, upon viewing the interactions and other content that have been used in Sponsored Stories, to control which of these interactions and other content are edible to appear in additional Sponsored Stories.”
Facebook has also agreed to pay out $10m to settle the suit, but the type of settlement means the payment will go to charity as opposed to the individuals who brought the case. It will also have to pay a further $10.3m in costs.
Last year, in a BBC documentary about Facebook, presenter Emily Maitlis asked Elliot Schrage, Facebook’s head of global communications and public policy, about this type of controversial activity on the site.
He said that by people clicking the ‘like’ button on brands’ Facebook pages, was them effectively giving their consent for their name to be allied to that company and endorsing it in a sponsored story or advert.
In the suit, Mark Zuckerberg, the site’s 28 year-old founder and chief, was quoted as saying a trust referral by a user was the ‘Holy Grail’ of advertising.
U.S. District Judge Lucy Koh said last week that the plaintiffs had shown economic injury could occur through Facebook's use of their names, photographs and likenesses.
“California has long recognized a right to protect one's name and likeness against appropriation by others for their advantage,” Koh said.
The case is the first one of its kind to have made any progress in the courts. Previous similar cases have been thrown out or have failed. It may mean thousands of other disgruntled Facebook users could advance similar cases.
However, if the case had succeeded, rather than being settled, consumer rights groups had hoped it could mean a major change as to one of the ways Facebook makes money out of marketing brands.
