Facebook facepalm: US judge tosses out 'sponsored stories' deal

Facebook's attempt to end litigation brought against it in the US over the launch of its unpopular "sponsored stories" feature has backfired with a judge throwing out the company's settlement offer late last week.

The social network had been expected to pay out around $20m and make amendments to sponsored stories, which arrived in Facebook in December 2011. The feature slurped up users' photos and used their faces in Facebook's in-site ads for brands after they had merely clicked the "thumbs-up" button and "Liked" the company.

Five complainants in the case filed a lawsuit seeking class-action status against Mark Zuckerberg's company, disputing Facebook's use of their photos in its advertisements.

In June, Facebook indicated it would hand over more control to its users with sponsored stories.

The move came after the lawsuit claimed that the network had violated California law by failing to give users the option to opt out of having their faces appear alongside ads on the site, nor from allowing them to gain some earnings from the promotion.

But late on Friday, California district judge Richard Seeborg dismissed Facebook's settlement offer. He said:

In this instance there are sufficient questions regarding the proposed settlement that it would not be appropriate simply to grant the motion and postpone resolution of those issues to final approval.

Justice Seeborg asked the plaintiffs' lawyers and Facebook - which considers the $20m settlement offer to be "fair, reasonable and adequate" - to show that the multi-million dollar figure hadn't simply been "plucked from thin air".

Facebook's proposal to end the litigation would have meant that the plaintiffs received $10m, plus up to $300,000 in costs, while a further $10m would have been ponied up to privacy advocates.

Importantly, however, the draft settlement also made it clear that Facebook would not be inhibited from running ads featuring users' faces in its sponsored stories feature.

Consumer Watchdog, which has a copy of the order here (PDF), unsurprisingly welcomed the judge's dismissal of Facebook's offer.

“Under the proposed settlement Facebook is poised to continue to misappropriate its users’ personal information without their consent,” said the consumer pressure group's staff attorney Laura Antonini.

More face-ache in Germany, too

Last week, Hamburg's data protection commissioner, Dr Johannes Caspar, confirmed (in German) that his office had reopened its probe of Facebook's facial recognition technology, complaining that the network was building a massive biometric database of its users.

The investigation had been suspended to allow time for the Irish data protection authority to conclude its talks with Facebook, which had included an audit of the company's data policy.

In December last year, Facebook had told the Irish DP commish that it would "examine the broader implications" of its photo-tagging feature during a July 2012 review.

Caspar has repeatedly argued that the tech, which detects the identity of people – based on existing pictures of those users on the site – in order to "tag" them in photos on Facebook, violates European data protection law because the default setting automatically opts users into being creepily identified and subsequently "tagged".

Facebook has previously countered that it rejected any such claim that it was failing to meet its obligation on data-handling in the EU.

As of last month, Facebook halted the facial recognition feature being used in Europe as talks with DP authorities continued.

"It is to be welcomed that Facebook clearly recognises that the process of collecting biometric data is at least not in accordance with data protection law in Europe. But Facebook can't just stay halfway there," Caspar said. ®