Facebook Inc(NASDAQ:FB) efforts to increase revenues
received a setback on Saturday when a federal judge rejected the company's
offer to settle in a privacy lawsuit. The lawsuit charges the company with
violating California law by publicising users' `likes' of certain advertisers
without their permission and giving them the choice to opt out or adequately
paying them.
The case related to Facebook's `Sponsored Stories'
feature where the platform's users endorse brands, often without their
knowledge or consent. The advertisers then use these likes (along their name
and pictures) to promote their brands to others on the network. The advertisers
pay Facebook for this service.
For Facebook it is an invaluable feature as it enables
advertisers to easily reach out to hundreds of thousands of prospective
customers at virtually very little expense. The revenues that it garners out of
this are vital for the company that has been struggling with sustaining its growth.
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The case registered against the social networking
giant said that it did not inform users properly about how their `likes' would
be used and how it would translate into profits for the company. A settlement
had been reached last year between Facebook and the plaintiffs.
As part of the settlement, Facebook had agreed that it
would inform it users about the sponsored stories limit the scope of their
usage and allow minors under the age of 18 to opt out of the feature. The
company also said it would pay $10milion to all the concerned advocacy groups
and privacy rights groups and another $10 million to cover their legal fees.
However Judge Richard G. Seeborg of the United States
District Court in San Francisco rejected the settlement and asked both the parties
to justify how they had arrived at the settlement figure.
The judge wanted clarification whether the users,
whose photographs and names have already been used, would be covered under the
settlement and whether they would receive any recompense.
Facebook's own contention was that the settlement was
fair, reasonable and adequate.
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