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August 20, 2012

US judge rejects Facebook’s Sponsored Stories settlement

The lawsuit was filed by five Facebook members in 2011

By CBR Staff Writer

A US judge has rejected Facebook’s proposed $20m legal settlement to resolve allegations that the company violated its members’ rights through the its ‘Sponsored Stories’ advertising feature.

US District Judge Richard Seeborg in San Francisco expressed several concerns with the proposed settlement, including a request for more information on why the agreement does not award any money to members.

In 2011, a lawsuit was filed by five Facebook members seeking class-action status against the social networking site.

The lawsuit states that Sponsored Stories feature violated California law by publicising users’ likes of certain advertisers without paying them.

The company was also accused of appropriating the names, images and identities of users to promote products without consent of the users.

The social networking company agreed to allow members more control over how their personal information is used as part of the proposed settlement.

Facebook had also agreed to pay $10m for legal fees and $10m to charity.

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A Facebook spokesman said that the company continues to believe the settlement is fair, reasonable, and adequate. "We appreciate the court’s guidance and look forward to addressing the questions raised in the order," spokesman said.

Facebook is estimated to generate $1m in revenue every day from Sponsored Stories.

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