Facebook May Be Liable for "Sponsored Stories"
by Jody Coultas, State Unfair Trade Practices Law

Social media website Facebook was denied dismissal of a California Unfair Competition Law (UCL) class action claim brought by Facebook users that alleged the website's use of "Sponsored Stories" was a misappropriation of their names, photographs, and likenesses for commercial use, according to the federal district court in San Jose, California.

Sponsored Stories are advertisements containing the name and profile picture of one of the friends of the Facebook user viewing the advertisement, suggesting that user's friend "likes" the sponsor's product or service. Sponsors paid Facebook for the advertisements. Aside from clicking the "Like" button, the user featured in the Sponsored Story did not actively consent to being featured in the advertisement. It was allegedly impossible to opt out of participation in Sponsored Stories.

The class representatives had standing based on a coherent theory of a measurable economic injury resulting from the misappropriation of their names, photographs, and likenesses for commercial use, according to the court. Such advertising allegedly had a concrete, provable value in the economy at large measured by the additional profit Facebook earned from selling the Sponsored Stories. The claim did not deal with the release of unauthorized personal information, but rather a personal endorsement that is highly valued by advertisers that was not compensated. To the extent that the users had a right to be paid for their endorsement and can establish the amount they should be paid, they can show an injury in fact required for standing.

The Facebook users met each of the three prongs of the UCL, according to the court. The users met the unlawful prong by asserting a violation of the Communication Decency Act. Based on evidence that the practice of selling the Sponsored Stories was contrary to a statutorily declared public policy of preventing nonconsensual appropriation of an individual's name, photograph, or likenesses for commercial gain, the users met the unfair prong. The users also met the fraudulent prong of the UCL by claiming that a reasonable Facebook user was likely to be deceived into believing he had full control to prevent his appearance in the Sponsored Stories and that Facebook acted fraudulently and intentionally failing to seek and acquire members' informed consent regarding changes to the terms of use.

Fraley, ND Cal., ¶32,390.

 (The above feature is selected from the newsletter published monthly along with full text documents and other materials provided to subscribers of the State Unfair Trade Practices Law.)