Facebook Settles 'Sponsored Stories' Lawsuit

Facebook has settled a class-action lawsuit regarding its "Sponsored Stories" advertising program, according to court documents.

In a Monday filing, Judge Lucy Koh with the Northern California district court said the two sides "have reached a settlement agreement in principle." Details were not disclosed.

Facebook was sued last year over "Sponsored Stories," which turned users' "likes" into ads that appeared on the social network's newsfeed. The program, , let advertisers take word-of-mouth recommendations and promote them.

If a friend checked into Starbucks, for example, that check-in showed up on a news feed, but depending on how many friends you had, it could quickly get buried beneath other status updates, photo postings, or FarmVille stats. With Sponsored Stories, Starbucks could pick up that posting and feature it in the sponsored section on the right-hand side of your homepage. It would only appear to friends; check-ins did not show up for complete strangers.

The lawsuit, however, said Facebook "improperly uses the names, photographs, likenesses, and identities of plaintiffs to generate substantial profits for Facebook."

Basically, the suit argued that Facebook was using its members as unpaid spokespeople for its advertisers. The company wants to make "Facebook members in the United States into their marketers, but without any compensation," the suit said.

Those named in the suit said they "liked" things like Rosetta Stone, UNICEF, Warrior Dash, and PopCorners. But clicking "like" did not necessarily equal an endorsement, they said. Most clicked the "like" button in order to receive special discounts or more information, and were unaware that their information would be used to promote those products to their friends.

Those people, the suit said, "are entitled to be compensated for the use of their names, likenesses, and/or photographs."

Last year, Facebook insisted that the feature is not intended to force certain products on users. "It's your friend saying 'look, I did this and I want to tell you about it,'" the company said.

The story was first reported by Bloomberg.

In December, these Sponsored Stories will start popping up in users' news feeds this year. They will appear exactly like a friend's status update or post might be displayed—but with a note from the brand and a "Sponsored" link on the bottom right.