Facebook Halts Beacon, Gives $9.5M to Settle Lawsuit

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Facebook has agreed to shut down a program that sparked a lawsuit alleging privacy violations, and set up a $9.5 million fund for a nonprofit foundation that will support online privacy, safety and security.

The lawsuit centers around Facebook's Beacon program, which let third-party Web sites distribute "stories" about users to Facebook. Beacon was launched in November 2007 and less than a year later plaintiffs filed a class action lawsuit "alleging that Facebook and its affiliates did not give users adequate notice and choice about Beacon and the collection and use of users’ personal information."

In addition to Facebook, the lawsuit's defendants include Blockbuster, Fandango, Hotwire, STA Travel, Overstock.Com, Zappos.com, and Gamefly.

Facebook never admitted wrongdoing but as part of a proposed settlement the company began sending notices to Facebook users this week. The settlement provides no compensation directly to users who receive the notice. Facebook users can opt out of the settlement, and should do so if they wish to pursue further legal action against Facebook related to the Beacon program.

"If you choose to do nothing, and remain in the settlement class you will be legally bound by the settlement," an FAQ on the settlement Web site says. "By doing nothing, you will be giving up the right to sue Facebook and the other Defendants over claims related to or arising out of the Beacon program."

Facebook has terminated the Beacon program and agreed to pay $9.5 million into an interest-bearing account to create a nonprofit foundation that will "fund projects and initiatives that promote the cause of online privacy, safety, and security." Although users in general will not receive compensation, the settlement includes $41,500 for the 19 individuals who filed the lawsuit. Court approval of the settlement is expected as soon as Feb. 26, 2010.

Facebook has taken several actions to improve privacy in recent days, including the formation of a safety advisory board designed to improve user safety on the site. A new security section on Facebook will be more comprehensive and include content tailored for parents, teachers and teens, the IDG News Service reported. Facebook has also decided to eliminate regional networks, which let users share information with potentially millions of other members.

Facebook's privacy section already allows users to control which of their friends can see content such as status updates and tagged photos, but the site remains a lightning rod in online privacy debates because it is so widely used and offers such an easy way to share personal information.

People who want to learn more about the Beacon issue should check out the Beacon class settlement Web site, which provides access to court documents, important dates and deadlines and other information. For those of you wondering how the now-defunct Beacon program worked, the Web site offers a detailed explanation, which reads as follows:

"If you were logged in to Facebook and visited a Beacon Affiliate, an action you took (like writing a review or purchasing an item), may have triggered that website to want to publish a story to Facebook. Before that happened, the website would send some information to Facebook in order for Facebook to generate a notification that would display in the lower right corner of your screen. If you clicked 'No, Thanks', no stories or information would be published anywhere on Facebook. Any information that was sent to Facebook's servers would be deleted. If you clicked 'Close' or ignored the story, the story would be sent to Facebook, but not yet published.

"The next time you visited your home page, you'd see a message reminding you that this story was being sent. There are three things you could have done with this story: approve the story by clicking 'Okay,' remove the story by clicking 'Remove', or ignore the entire message by doing nothing. If you approved the story and clicked 'Okay,', the story would be published on your Wall and may have appeared in your friends' News Feeds. If you removed the story using the 'Remove' link next to it, the story would never appear in your Wall or a friend's News Feed. If you ignored the whole message, it would go away after a few days and nothing would have been published to Wall or News Feed. However, when you ignored a story, it remained queued, so that the next time you generated a Beacon story, this home page message would have two stories, instead of one."

This story, "Facebook Halts Beacon, Gives $9.5M to Settle Lawsuit" was originally published by Network World.

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