Facebook Users Question $20 Million Settlement Over Ads

May 13, 2013
Originally published on May 14, 2013 12:42 pm

A San Francisco judge will decide this month whether to approve a settlement in a class-action lawsuit that could affect more than 70 million Facebook users. The $20 million deal would mark the end of a years-long battle over the social network's "Sponsored Stories" advertising.

But Facebook users' images could still appear in ads if they don't change their settings. And many users say the deal before the judge doesn't go far enough to protect their privacy.

The Back Story

The lawsuit alleges that the company "unlawfully used the names, profile pictures, photographs, likenesses, and identities of Facebook users in the United States to advertise or sell products and services through Sponsored Stories without obtaining those users' consent."

It happened to the teen daughter of Kim Parsons of Hermitage, Tenn. Neighbors called Parsons when they saw her daughter's picture posted with an ad for a local ice cream store. At first Parsons thought her 13-year-old had managed to visit the ice cream shop without her, but she hadn't. Her daughter had just clicked a "like" button online.

Her daughter's photo and the endorsement of the business were being used by Facebook to make money online. That's generally how the Sponsored Stories service works. Facebook started the program in 2011, and typical posts show a photo of a user with the tag line saying, for example, "Steve Henn likes Patriotic Pants." (Friends would see that ad because sometime in the past I clicked "like" next to one of their ads.)

Parson's daughter had clicked "like" on Facebook more than 200 times. So her daughter's image was being used in ads constantly. And Parsons felt like she had no way to stop it. "I should not have to come in on the back end trying to protect my child; that should be understood," she said.

"There is a very strong legal case here," said Heidi Li Feldman, a law professor at Georgetown University who specializes in class-action torts and ethics. "I have no question in my mind that as a matter of business ethics Facebook acted entirely unscrupulously. This is bad behavior. They intentionally and knowingly appropriated people's images without getting their permission for commercial use."

Facebook denies any wrongdoing, but in the settlement deal before a judge, the company has agreed to pay $20 million. If approved, it could result in $10 payouts for individual users.

Opt-Out Options

As part of the settlement proposal, Facebook will let adults opt out of this ad program, but only for two years. The settlement would also create an elaborate system to give parents the ability to prevent their kids' images from appearing in these ads. But before that could happen, both the parents and children would have to tell Facebook they are related, and then the parent would need to dig into his or her settings and ask Facebook to stop using the child in ads. Feldman says it's laughable.

"Do you know what is hilarious about that?" asked Feldman. "That becomes just another data collection mechanism for Facebook. I mean, just think how valuable it would be for them to find out who is related to whom on Facebook. For marketing purposes — I mean, my God — parents are already targeted."

The settlement does provide one option for parents who are not on Facebook. If they would like to prevent their children's images from being used in Facebook's ads they can submit an online form and attach a "notarized statement declaring your rights as a parent or guardian."

Facebook sent a mock-up of what this form could look like to the court. In the mock-up, the company added, "If you don't submit this statement or we find it to be insufficient we won't be able to process your request."

The price of getting a letter notarized at the local UPS in Facebook's home town of Menlo Park, Calif., is $10, which coincidentally is the same amount Facebook is offering to pay users whose images were used in Sponsored Stories without permission.

Facebook calls this settlement proposal both fair and adequate. If the judge doesn't sign off next month, the attorneys will try to negotiate a new deal or head toward trial.

Parsons, the mother of three from Tennessee, has another idea. She'd like the court to require Facebook to simply stop using images of minors in ads. And, she says, if the company wants to use her picture it should have to ask first — for each and every ad.

NPR's Elise Hu contributed to this report.

Copyright 2018 NPR. To see more, visit http://www.npr.org/.


Next month, a federal judge will decide whether to approve a settlement in a class action lawsuit against Facebook that could affect more than 70 million Americans. The suit began when Facebook started using the likes and pictures of its users as endorsements, in ads the company calls "sponsored stories." As NPR's Steve Henn reports, a number of groups are calling the proposed settlement unfair.

STEVE HENN, BYLINE: Facebook started this ad program, sponsored stories, back in 2011. And it works like this: If I click on a "like" button next to a product - say, Coke - Facebook can then use my picture to send an add to my friends saying, Steve Henn likes Coke. The more you click on like buttons, the more ads you can appear in.

Facebook also started doing this with clicks and likes it collected from kids.

KIM NATALIE PARSONS: I have three children, and two are on Facebook.

HENN: Kim Natalie Parsons says she was furious when she realized her daughter's photos were being used in ads on Facebook without her knowledge or permission.

PARSONS: It was brought to our attention by another friend of ours, who is linked to my daughter on Facebook.

HENN: Parsons say her community in Hermitage, Tenn., is tight-knit.

PARSONS: We do a lot of watching each other's children, making sure that nothing is getting missed by the parent. And her picture was posted with an ad.

HENN: For a local ice cream store. At first, Parsons thought her 13-year-old had managed to sneak away and visit the ice cream shop without her knowledge. Then, she realized she hadn't. Her kid had just clicked a like button online. And it turned out, her daughter had clicked like buttons more than 230 times.

PARSONS: I should not have to come in as the parent, on the back end, trying to protect my child. That should be an understood.

HENN: Actually, it turns out a lot of states, including California, have laws on the books that ban companies from using people's images in advertising without explicit permission.

HEIDI LI FELDMAN: There is a very strong legal case here.

HENN: Heidi Li Feldman is a law professor at Georgetown, who specializes in class action torts and ethics.

FELDMAN: This is bad behavior. They intentionally and knowingly appropriated people's images without getting their permission, for commercial use.

HENN: Quickly, the company was hit with a class action lawsuit. By the summer of 2012, Facebook caved and tried to settle, offering $20 million. Scott Michelman is an attorney at Public Citizen.

SCOTT MICHELMAN: Well, the settlement agreement had a number of problems, the major one being that no money was ever to go to class members - under any circumstances.

HENN: Instead, $10 million was supposed to go to the plaintiffs' attorneys who brought the case, and $10 million was supposed to go to charity. A federal judge rejected that deal, ruling it was unfair to Facebook users like Kim Parsons. Now, Facebook is trying to settle the case again.

MICHELMAN: The second deal looks, in many respects, like the first. Neither prevents Facebook from violating state laws by using the images of minors without parental consent.

HENN: Facebook declined our offer for a recorded interview. But the company denies any wrongdoing, and calls the latest offer fair and adequate. If this deal goes through, adults will get the chance to opt out of these sponsored stories, but just for two years; and parents will be able prevent their kids' images from showing up in these ads as well. But for that to happen, the parent has to be on Facebook. Both the child and the parent have to tell Facebook they're related to each other; and then the parent has to dig through Facebook's settings and find the right button to click, to turn sponsored stories off.

[POST-BROADCAST CLARIFICATION: After this story aired, Facebook contacted NPR to say that it will provide a way for parents who are not on Facebook to prevent their children's pictures from being used in ads. If the settlement is approved, parents who want to disable the feature will be able to submit a form online, and attach a notarized statement declaring their "rights as a parent or guardian."]

Georgetown law professor Heidi Li Feldman says that's laughable.

FELDMAN: Do you know what is hilarious about that? That is just - becomes another data-collection mechanism for Facebook. I mean, just think about how valuable it would be to find out who's related to whom on Facebook. For marketing purposes? My God.

HENN: And many parents like Kim Natalie Parsons, the mom from Tennessee, are proposing a simpler idea. They've asked the court to require Facebook to stop using images of their children in advertising - period. And Parsons says if the company wants to use her picture in an ad, it should have to ask her first - each and every time.

Steve Henn, NPR News, Silicon Valley. Transcript provided by NPR, Copyright NPR.