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The suit was actually settled last month, but wasn't made public until now

Facebook landed itself in yet another privacy lawsuit over the use of "Sponsored Stories," and will now have to pay $10 million to settle it.

Facebook's Sponsored Stories are advertisements that contain a friend's name, profile picture and text indicating that that particular friend "likes" the product, service, or person being advertised. These ads act as a recommendation from that friend, but there's one problem -- that Facebook friend knows nothing about it, and they're not being compensated for acting as a referral. They also can't opt out.

Five Facebook members sued the social network for these Sponsored Stories, saying that this practice violates California law. The lawsuit was filed in federal court in San Jose, California.

The suit was actually settled last month, but wasn't made public until now. According to the lawsuit, this could have included one of every three Americans, meaning Facebook could have been in some serious hot water and paid billions if word got out.

U.S. District Judge Lucy Koh found that Facebook's Sponsored Stories could cause "economic injury" by using friends' names, likenesses and pictures. She ordered a cy-pres settlement, meaning Facebook's $10 million would be sent to charity.

According to Facebook, Sponsored Story advertisements are up to three times more valuable than a regular Facebook ad.

It looks like Facebook is dropping lots of dough lately, with the expansion of its headquarters in Menlo Park, California from 2,200 employees to 6,600, a recent $1 billion Instagram purchase, a possible Opera purchase for $1 billion, and an expected smartphone launch by next year.

Source: Reuters





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