Facebook Settles Law Suit for $10 Million

Facebook’s service allowed companies to pay to retransmit users’ activities to their friends’ pages. If a user clicked the “like” button for a brand, the click might show up as a “sponsored story” on friends’ pages. A “Sponsored Story” is an advertisement that appears on a member’s Facebook page and generally consists of another friend’s name, profile picture and an assertion that the person “likes” the advertiser. The ads started in early 2011.

Some Facebook users sued, saying that Facebook used their images for commercial activity without paying them or allowing them to opt out. Facebook had argued that the plaintiffs did not show they were hurt by the practice.

Court documents from late last week say a settlement has been reached. Facebook attorney Michael Rhodes confirmed that it’s for $10 million, which will be given to charity. A judge still needs to approve the settlement.

In the lawsuit, Facebook Chief Executive Mark Zuckerberg was quoted as saying that a trusted referral was the “Holy Grail” of advertising.

Facebook shares closed at $30.01 on Friday, down 21 percent since the company’s initial public offering last month.

Reuters first reported details of the settlement.