Judge Approves Facebook's $20M Settlement to Users Featured in Sponsored Stories

$15 Will Be Paid to Each User Who Joined Class, While Remainder Goes to Non-Profits

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A U.S. district court judge has approved a $20 million settlement to be paid by Facebook to users whose names and likenesses were used in sponsored story ads.

Facebook confirmed the $20 million settlement, which was approved on Monday by a U.S. district judge in San Francisco. The money will be paid to about 614,000 Facebook who responded to a legal notice the social network emailed earlier this year to affected users who'd been featured in sponsored stories -- or ads with social context that show whether a user's friends have "liked" or otherwise engaged with a brand's page or content -- prior to Dec. 3, 2012.

The total class of U.S. users who received the notice was roughly 150 million.

"We are pleased that the settlement has received final approval," according to a statement from a Facebook spokeswoman.

The settlement per user amounts to about $15, and the balance will go to attorney fees and to a group of non-profits agreed upon by the plaintiffs, including the Center for Democracy and Technology and the Electronic Frontier Foundation. Another 7,000 users who received the legal notice opted out of the settlement altogether, which frees them up to file separate lawsuits against Facebook.

The outcome is the result of a class action suit filed by five plaintiffs in 2011. The issue at stake was that Facebook had used their personal information for advertising without compensating them or giving them a way to opt out.

Meanwhile, Facebook is doing away with sponsored stories in name but not in practice. The company announced in June that sponsored stories would technically be phased out as part of its ad cull, but ads with social context -- once the bread and butter of Facebook's ad business -- will remain.

Judge Richard Seeborg wrote in his decision that the small amount awarded per user in the settlement is appropriate in light of the fact that sponsored stories, while lucrative for Facebook, had not "undisputedly violated the law."

"Regardless of the degree of benefit to Facebook, however, plaintiffs faced a substantial burden in showing they were injured by the Sponsored Stories," he wrote.

Court filings state that Facebook took in close to $234 million from sponsored stories between January 2011 and August 2012, according to Reuters.

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