Proposal Would Kill Beacon, Have Facebook Paying $9.5 Million

Late last week, a federal judge in California gave preliminary approval to a settlement of the class action lawsuit regarding Facebook's Beacon program. The controversial program, launched back in November of 2007, allowed Facebook users to share online purchases made on third-party affiliate websites with their social networking friends. The problem with the program was that it was opt-out instead of opt-in, angering many Facebook users who unknowingly shared information they wished they wouldn't have.

One such victim was Sean Lane, now the lead plaintiff in the lawsuit. He was especially angry after the news of an Overstock.com purchase was posted to his Facebook profile. The purchase, a diamond ring he bought for his wife, was meant to be a surprise. After that incident, Lane, along with eighteen other plaintiffs, filed a class action lawsuit against Facebook, claiming that Beacon's opt-out option was "inadequate, misleading and deceptive."

Details of the Agreement: Shutting Down Beacon, Paying Damages, Non-Profit Foundation

The case has been in litigation since last year, but now looks like it's drawing to a close. U.S. District Court judge, Richard Seeborg in San Jose, has approved the proposed Facebook settlement that would have the company paying out $9.5 million, two-thirds of which would go to setting up a non-profit foundation to fund "projects and initiatives that promote the cause of online privacy, safety and security." The remaining money would then be split among the lawyers and the plaintiffs, each of whom would receive damages of $1000-15,000, according to MediaPost.

The other major part to the Facebook settlement is the required termination of Facebook's Beacon program in its entirety. Although Facebook had quickly reacted to the Beacon outcry after its launch, changing the system over to opt-in and even issuing a formal apology, the program still exists today. (You can check your settings by going to Settings -> Privacy Settings -> Applications -> Settings tab. Then scroll down to the bottom to see if "Beacon websites" is checked or unchecked. Checked will ensure no Beacon stories get posted to your profile).

If the proposed settlement goes through, Facebook would then be relieved from liability from any future lawsuits regarding the same complaint and even those still pending like the Facebook/Blockbuster class action suit brought in April 2008.

Settlement Sounds Great...Especially for Facebook

On the surface, the proposed settlement sounds fair enough to all parties involved. Damages are paid and Facebook has to promote online privacy. However, as David Johnson points out on the Digital Media Lawyer Blog, Facebook is already required by law to promote online privacy and the safety and security of its users' information per FTC mandates. In addition, Facebook would get to nominate one and have say over the other two board members on the proposed Privacy Foundation's board of directors.

Says Johnson: "Facebook effectively gets most of its money back to fund projects that it is already has an obligation to perform."

Sounds like the real winner here may be Facebook.

You can read the Settlement Agreement here, courtesy of CircleID. The settlement was proposed last month, but only received preliminary approval on Friday. The affected parties have until February 1st to object to the proposed settlement.