Facebook Agrees to Pay $10m to Settle Lawsuit

In a lawsuit filed against social networking giant Facebook last year, the company has agreed to pay $10 million to users who launched complaints against the company.

There were five Facebook users who were irritated about their faces being used as part of Facebook’s ‘sponsored stories’ which enable advertisers to use the display pictures and names of people who have liked their brand in their adverts on the website. According to these people, displaying ones name and profile pictures are indeed the violation of California state law.

The settlement was finalized in the previous month but announced this weekend. According to the settlement, the amount will go towards charity instead of these individuals. This type of settlement is called cy-pres settlement.

However, this settlement is yet to be approved by the judge.

Mark Zuckerberg, founder of Facebook, claimed a trusted referral is similar to “Holy Grail” of advertising. Sheryl Sandberg, Chief operating officer at Facebook, said while comparing a standard advert on the site, the value of sponsored story is at least two or three times greater.

According to the judge Lucy Koh, “California has long recognized a right to protect one’s name and likeness against appropriation by others for their advantage.”

This is the only case that has made any progress in the courts. In comparison with previous cases, they were just simply thrown out or became unsuccessful. It may mean many other Facebook users could prosecute similar cases.

However, if these individuals win the case instead of being settled, consumer rights groups had hoped it could mean a drastic change, as one of the ways the social giant generates revenue is through marketing different brands.

Facebook’s share price has come down to 21 percent since its initial flotation last month. The company receives bad press after large drop in price.