Facebook gets $20 million slap on the wrist for using you in advertising


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On July 12th, a District Court judge will decide whether to approve Facebook’s proposed settlement regarding the allegedly unlawful use of its members’ images in their Sponsored Stories ads.  Previously, members had no way to stop Facebook from using them in these ads, but under the proposed settlement, they’ll be able to limit (but not entirely stop) it.  Facebook also has to pay up $20 million:  half goes public interest organizations, and the other half to the attorneys who brought the case.

Opponents to the settlement say it’s flawed because it doesn’t pay anything to Facebook’s users, the group that was actually harmed by Facebook’s actions.  They also argue that Facebook continues to deny users a way of completely opting-out of appearing in Sponsored Stories, and that more openness about the advertising process isn’t the same as more privacy.

Sponsored Stories are ads that appear on the sidebar of a member’s Facebook window that usually contain a friend’s name, profile picture, and the fact that the friend has liked an advertiser’s page.

Although Facebook offers several types of advertising options, Sponsored Stories are generally regarded as the most attractive option to advertisers because the referral from a trusted person reportedly raises an ad’s effectiveness by 46%

The case background

The class action case, Angel Fraley et al. vs. Facebook Inc., allegedly “comprised of thousands if not millions of persons,” including a subclass of minors whose images were used in advertising.  The proposed settlement terms will allow parents “the means to prevent their children from appearing in sponsored stories altogether.”

The gist of the complaint was that the class members “were harmed by the nonconsensual use of their names, photographs, likenesses, or identities in Sponsored Stories,” and that “Facebook’s conduct was a substantial factor in causing that harm.”

According to the class action complaint for damages, Facebook rolled out Sponsored Stories on January 25th, 2011, did so without obtaining members’ express permission, and did not provide any opt-out.  In fact, their Privacy Policy at the time reassured members that things like Sponsored Stories wouldn’t happen:

“You can use your privacy settings to limit how your name and profile picture may be associated with commercial, sponsored, or related content (such as a brand you like) served or enhanced by us. You give us permission to use your name and profile picture in connection with that content, subject to the limits you place.”

The suit was based on three causes of action, including California’s right of publicity statute (Civil Code § 3344).  The right of publicity means the right to control commercial (in other words, moneymaking) use of your image.  You see it invoked most often with celebrities, people whose images and endorsement hold significant influence and economic value. Whereas the typical right of publicity case involves a lot of money made off one famous person’s image, this case involves a lot of money made off a lot of non-famous people’s images–those of you and your friends on Facebook.  Your endorsements aren’t worth much by themselves, but their sum is extremely valuable.

The suit also alleged that Facebook mislead members by saying they had full control over the use of their images in ads through their privacy settings, when in fact there was no way to opt out of Sponsored Stories; that Facebook misrepresented its trustworthiness and the level of control that its members had over privacy and advertising; and that it “intentionally profit[ed] from the nonconsensual endorsements extracted from Members without sharing those profits with those Members.”  In other words, Facebook profited off its members’ likenesses and didn’t give them a cut.

Perhaps the most interesting part of this suit is the concept that non-celebrity endorsements still hold monetary value. At Abine, we’ve illustrated the fact that each Facebook user is worth a dollar amount with our Facebook value calculator, and this complaint echoes that point.  The harm alleged here is not only the privacy concerns and discomfort and/or embarrassment of unknowingly promoting an advertiser, but the economic loss to those class members: Facebook profited from your endorsements without giving you a piece of the revenue.

Facebook’s biggest mistake was failing to ask for permission. A key element of right of publicity claims is consent: Facebook probably would have been able to get away with it if they had asked their members to agree (and what choice do people have when Facebook foists policy changes on them?), but they slipped it into their notoriously dense privacy and terms literature without notifying anyone.  Facebook is usually the master of small changes, but this one came back to haunt them to the tune of $20 million and more bad press around privacy.

People want control over their personal information. They weren’t given control here. Sponsored Stories were using their faces, names, and activities to sell products, and they couldn’t do anything about it.

The way Facebook handled Sponsored Stories is a metaphor for the way they’ve historically treated their users by deciding what’s best for them without their say. They decide what information their users want to share by default, when, and with whom; they gradually reduce their users’ privacy and control; and they express it all as if it’s for the user’s benefit.

What would you like to see happen with Sponsored Stories?  How do you feel about Facebook using your image in advertising?  Let us know in the comments section below.

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