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June 17, 2012

Facebook ends sponsored stories lawsuit, pays out $10m to charity

Facebook has agreed to hand over $10m to settle the class action lawsuit in which the site used the faces of several users in sponsored story ads without their consent.

By Tineka Smith

Facebook lawsuit
Photo Credit: Bloomsberries

Sponsored stories highlight brands that a user has liked and the story will then appear in the newsfeeds of the user’s friends.

The lawsuit said that Facebook did not give users the chance to opt out of having their photo used.

When the lawsuit was filed against Facebook last year the company attempted to have it thrown out but a U.S. district judge rejected Facebook’s attempt for dismissal.

"We are reviewing the decision and continue to believe that the case is without merit," said a Facebook spokesperson at the time.

Facebook has agreed to pay out $10m to settle the suit, but the $10m will go to charity instead of individual users.

A U.S. district judge said the plantiffs showed suffered from economic injury from Facebook’s actions.

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The sponsored stories lawsuit is not the only one Facebook has had to deal with since going public.

Facebook shareholders are also suing the social network for allegedly hiding negative information before its IPO.

The lawsuit has also been filed against CEO Mark Zuckerberg and several banks for allegedly withholding critical information ahead of Facebook’s IPO.

The information said to be withheld was "a severe and pronounced reduction" in forecasts for Facebook’s revenue growth.

The concealed information about Facebook’s value being significantly less than projected is a reminder of what many analysts had previously said about Facebook’s high share price, deeming it presumptuous and overpriced.

The plaintiffs assert that the forecast information was only told to a select group of preferred investors and not the entire community.

Please follow this author on Twitter @Tineka_S or comment below.

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