Facebook Settles Privacy Claims over “Beacon” Ad Program

This posting was written by Thomas A. Long, Editor of CCH Privacy Law in Marketing.

Social networking website Facebook has agreed to shut down its controversial “Beacon” advertising program, as part of a settlement of a class action lawsuit brought by Facebook members, alleging that the program violated their privacy rights.

Launched in November 2007, Beacon allegedly caused information about books, movies, and other products purchased by Facebook members on participating sites—such as Blockbuster and eBay—to be posted publicly on Facebook’s “news feed,” without permission.

Facebook members were allegedly “opted in” to Beacon automatically and were not notified of their participation in the program.

Class Action

The complaining members filed suit against Facebook and several participating retailers (including Fandango, Hotwire, and Overstock.com) in August 2008, alleging violations of the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, the Video Privacy Protection Act, the California Consumer Legal Remedies Act, and the California Computer Crime Law.

Proposed Settlement

Facebook admitted no wrongdoing in the settlement agreement, which was filed with the federal district court in San Jose on September 18, 2009. The agreement includes a provision under which Facebook will contribute $9.5 million to a “settlement fund,” devoted to the formation of a non-profit foundation for the purpose of promoting online privacy, safety, and security.

“We learned a great deal from the Beacon experience,” said Barry Schnitt, Director of Policy Communications for Facebook. “For one, it was underscored how critical it is to provide extensive user control over how information is shared. We also learned how to effectively communicate change that we make to the user experience.”

The settlement is awaiting judicial approval.

The proposed settlement agreement is Lane v. Facebook, Inc., Case No. 5:08-cv-03845-RS, dated September 18, 2009. Text of the agreement will appear at CCH Privacy Law in Marketing ¶60,377.