Facebook forks out $10m in ad campaign lawsuit

By Juha Saarinen on Jun 18, 2012 3:27 PM
Filed under Communications

Further legal battles loom.

Facebook will pay $US10 million to charity in order to settle a legal case over allegations it misused user information for advertisements.

The settlement, made last month but only publicised this week, allowed the social media behemoth to skirt a potential billion-door payout if the case progressed.

The company was alleged to have implemented users’ likes of advertisers without compensating them, or allowing them to opt out of taking part in the “Sponsored Story” advertising.

User names and profile pictures were also used in the advertising.

Chief executive Mark Zuckerberg labelled the trusted referral advertising campaigns the holy grail of advertising, while chief operating officer Sheryl Sandberg said the value of the campaigns were two to three times that of normal Facebook ads.

Some estimated the case could have included a third of the US population as applicants if it progressed, riskings billions in damages.

Presiding judge Justice Lucy Koh said the claimants were able to show Facebook’s use of information was potentially financially damaging to the five social network users who led the case.

Justice Koh said California recognised the right to be protected against the appropriation of user information by others to their advantage.

Facebook faces further legal action after its troubled public offering, as dozens of investors are suing the company to recoup losses incurred at the NASDAQ trading debut.

The company is defending its actions that saw it disclose lower mobile revenue growth to the underwriters of the public offering, but did not amend the prospectus as customary practices that did not violate any rules. Facebook wants to consolidate all the lawsuits into a single hearing, held at the US district court in Manhattan, New York City.

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Facebook forks out $10m in ad campaign lawsuit
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