What PR firms should read into Facebook's 'Sponsored Stories' settlement

On June 18, Facebook agreed to pay $10 million to settle a lawsuit brought by plaintiffs who claimed that its "Sponsored Stories" service used the names and likenesses of the plaintiffs without their consent in violation of their right of publicity.

On June 18, Facebook agreed to pay $10 million to settle a lawsuit brought by plaintiffs who claimed that its “Sponsored Stories” service used the names and likenesses of the plaintiffs without their consent in violation of their right of publicity.  

Five Facebook users, including one person younger than 18, sued the company in California within weeks of its January 25, 2011, announcement of its new Sponsored Stories service, which allows marketers to incorporate a user's name, posts, page “likes,” and other Facebook activity into an advertisement displayed to some or all of that user's friends. One plaintiff claimed that three days after Facebook launched the program, and eight weeks after he had clicked on the “like” button for Coca-Cola, he began appearing in Sponsored Stories about Coca-Cola. These Sponsored Stories, he claimed, were shown to his friends, but at no point did Facebook obtain his consent or pay him for his appearance. 

The proposed settlement is scheduled for court approval on July 12. If approved, it will result in changes to Facebook's platform for at least two years. Those changes will require Facebook to notify users, as well as the parents or guardians of minor users, that Sponsored Stories are advertisements and that a user's content, including a user's name and likeness, may be featured in Sponsored Stories. Moreover, users will be able to see and control the actions they take that lead to their content being featured in Sponsored Stories. Users will also be able to limit further use by Facebook in connection with the service. Notably, the proposed settlement also requires that Facebook pay $10 million – not to the plaintiffs, but to online advertising, privacy, and safety organizations.

The proposed settlement might make marketers more inclined to participate in the Sponsored Stories program, but there are still meaningful risks to marketers and their PR firms. For example, a consumer's message that is incorporated into Sponsored Stories might be deemed the marketer's message, with the same legal and regulatory rules applying to that message as apply to other forms of commercial speech, including whether or not the message is accurate and is able to be substantiated. 

What if a consumer posted any of the following messages and it was then incorporated into a marketer's message?

• “I just drove 250 miles in my new Chevy Volt without recharging my battery or refilling my tank.”

• “My teeth are whiter after a week using Crest.”

• “I have more energy after drinking Mountain Dew.”

• “I have lost 10 pounds in a week taking Hoodia herbal supplements.”

• “I just received a free T-Mobile phone” (without disclosing that to do so, the consumer had to sign up for a two-year service contract).

In each instance, the named marketer of the product would need to establish that the statements in these Sponsored Stories were accurate and could be substantiated. In fact, this is the same type of substantiation that the marketers – and their marketing agencies – would need to provide if the statements appeared in a 30-second television commercial. 

In addition, there is potential liability when the consumer's message infringes on another party's copyrighted work or trademark. Once the consumer's message is incorporated into a marketer's Sponsored Story, the infringing activity may be attributed to the marketer itself and expose the marketer and its PR firm to liability if the latter was assisting in the creation of the Sponsored Story. 

To help mitigate against these risks, marketers and their PR firms that seek to benefit from Facebook's Sponsored Stories program should consider taking a number of protective steps:

• Limit Sponsored Stories to “likes” and not other information about users;

• Review Sponsored Stories and have Facebook remove – and prohibit the further posting of – any Sponsored Stories that contain unsubstantiated product claims, false or disparaging claims about other companies' products or services, or content owned by other parties; and

• Review and update the privacy policies of the marketer and the PR firm to ensure that the use of any data collected via Sponsored Stories complies with such policies.  

Marketers who believe there is value in Facebook's Sponsored Stories program should speak with an experienced new media attorney about the implications of both the proposed settlement and the proposed changes to the Facebook platform and terms. Doing so might help avoid legal issues for a marketer unwittingly participating in Sponsored Stories or other similar advertising campaigns or promotions.

Michael Lasky is a senior partner at the law firm of Davis & Gilbert LLP, where he heads the PR practice group and co-chairs the litigation department. He can be reached at mlasky@dglaw.com.

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