December 18, 2011 7:11 pm

Facebook set for suit over publicity

Facebook’s practice of showing people that their friends “like” specific products could run afoul of a California law that gives both celebrities and ordinary citizens the right to control how their names and pictures are used for commercial endorsements.

A federal judge in San Jose has rejected Facebook’s bid to dismiss a case that accuses the dominant social network of violating California’s “right of publicity” statute and state unfair trade practices law.

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The ruling comes three weeks after Facebook settled a wide-ranging complaint by the US Federal Trade Commission and agreed to future monitoring for two decades. It suggests that privacy issues will continue to affect the tech powerhouse it as it prepares for its widely anticipated initial public offering.

The publicity case, which seeks to represent tens of millions of Facebook users, hinges on the “Sponsored Stories” that appear on many Facebook pages, telling users that specific friends “like” companies or products such as Intel, Land’s End and the Nissan Leaf.

The promotions were introduced in January of this year and have been a hit with advertisers, according to Facebook executives.

Chief operating officer Sheryl Sandberg has said that endorsements by users’ friends made viewers twice as likely to recall the ad and three times as likely to buy the product. Chief executive Mark Zuckerberg said that “a trusted referral is the Holy Grail of advertising”.

US District judge Lucy Koh cited both comments in her 38-page ruling issued late Friday. She wrote that while internet privacy suits had foundered in the past over the inability of consumers to quantify the damage to them, the plaintiffs in this case made a logical claim that they should be entitled to the gain in ad revenue from any unwitting endorsements.

Facebook had no immediate comment.

The case is still at an early stage, with many facts in dispute. Ms Koh wrote that the publicity and unfair-practices claims “present novel issues of state law for which there is no binding authority.”

The unfair-practices issue springs from the users’ claims that they were Facebook members before the January introduction of Sponsored Stories, and thus never agreed to participate; that it is impossible to entirely opt out of them, though Facebook elsewhere promises great user control; and that in many cases they clicked “like” on a sponsor’s Facebook page or off-Facebook website only to get a discount or view content.

Some Facebook users do not realise how often they are being used to promote products, and which ones they are touting, because they are not shown their own endorsements.

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