$20 million is not enough! How much should Facebook pay for settling sponsored stories dispute?

“Liking” something on Facebook enslaves your name and face to sponsored story bondage.

That didn’t change after a class action lawsuit was brought against Facebook in December. The case was settled out of court, where consumer rights groups had no chance to change the methods by which Facebook exploits users – i.e., profiting by associating users’ likenesses with brands.

On Thursday the settlement in that suit – which would have seen Facebook hand over up to $10 million for the class-action lawsuit’s attorneys and $10 million to privacy groups such as the Electronic Frontier Foundation – was rejected by U.S. District Judge Richard Seeborg, who said that $20 million isn’t enough to get Facebook off the privacy hook.

The settlement also, theoretically (the changes aren’t spelled out), would have given users more control over their “likes”, including allowing users who are 18 and younger to opt out of sponsored stories entirely.

In May, Facebook agreed to pay out $10 million to settle the class action lawsuit, which was brought by users unhappy over the use of their details in what Facebook calls “sponsored story” ads.

When you click “Like”, Facebook has up until now felt free to consider that an endorsement, and thus people have found themselves poster boys and poster girls for whatever sponsored story Facebook wants to cast them in.

(If you fancy watching something squirmy, watch our video at what happened when BBC reporter Emily Maitlis quizzed Facebook’s Vice President of Public Policy Elliot Schrage about the ethics of sponsored stories.)

And so the suit was brought by unhappy poster boys and girls.

It’s based on California’s Right of Publicity Statute, which prohibits the non-consensual use of another person’s name, voice, signature, photograph, or likeness for advertising purposes.

Sponsored stories generate more than $1 million in revenues every day, Facebook COO Sheryl Sandberg said last month during the company’s first-ever earnings call.

Consumer Watchdog, a nonprofit consumer group, earlier this month urged the judge [PDF] to reject the settlement, on the basis of it utterly lacking any damages payable to Facebook users.

In lieu of seeking damages for plaintiffs, the class action lawyers secured up to $10 million for themselves, $10 million for nonprofits, $300,000 for costs, and a fat hen’s egg of $0.00 for Facebook users.

Why no payout for the injured parties whose likenesses got sucked up, without their permission, into the Facebook Sponsored Stories revenue machine?

As Judge Seeborg said in his ruling rejecting the settlement [PDF], it would be “impractical to the point of meaninglessness” to try to carve up $10 million in damages among “a class that may include upwards of 70 million individuals.”

More like 955 million active monthly users, actually, going by what Facebook reported on its earnings call.

Of course, not every one of those nearly 1 billion users is going to bother joining a class action lawsuit.

So if 100 million did bother to join the class action suit, and if damages were a nominal slap on the wrist – say, $10 per person – Facebook would be looking at damages of $1 billion, apart from administrative costs.

Is that just too big a settlement for direct monetary relief, Judge Seeborg pondered?

In actuality, as the judge pointed out, anybody suffering from Facebook’s glad-handling of their personal information could be awarded $750 per violation.

How does one arrive at a fair settlement amount in compensation for past damages?

We know how much Facebook makes from our likenesses: $1 million daily in sponsored stories revenues.

Does it cost us anything, though, outside of the outrage that we’re being used in this way without permission and that our privacy is being trampled on?

It’s not that $10 million going to the EFF et al. isn’t a good thing, mind you, the judge said. It’s just that it’s darn arbitrary. It’s figmentary. It’s fuzzy. It’s based on nothing.

Or, to use his own wording, it’s a figure that well may have been “plucked from thin air”.

From his ruling:

At the hearing, Facebook argued the $10 million figure represents a fair estimate under just such an analysis. That well may be so, but the present motion does not provide adequate support for the conclusion. Although it is not a precise science, plaintiffs must show that the … payment represents a reasonable settlement of past damages claims, and that it was not merely plucked from thin air, or wholly inconsequential to them, given their focus on prospective injunctive relief.

What will the final payout figure be?

The answer is precisely this: who cares?

The only ones who might possibly get their hands on it, other than class-action lawsuit lawyers, are California Facebook users, given that the case was filed there.

If you’re on Facebook, think about joining Naked Security’s Facebook page, where over 190,000 people stay apprised of privacy issues, scams and malware attacks while relishing the irony of not getting paid for it.