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Facebook's $10m Sponsored Stories settlement fails to obtain judge's approval

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A California District Court Judge has rejected a settlement which would see Facebook pay out $10 million over its Sponsored Stories feature.

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The judge presiding over a year-long class action lawsuit concerning Facebook's Sponsored Stories program has declined to approve a settlement that would see the social network pay out $10 million while being required to introduce opt-out features. According to a report from Wired, Judge Richard Seeborg is concerned that the payout represents a relatively insignificant sum for the Menlo Park-based company, which recently posted $1.18 billion in revenues in what was considered a disappointing second quarter.

Proposed in a California district court, the settlement's primary payout is known as a cy-près, with the money being handed over to a charitable trust for the benefit of various non-profit groups, including the Electronic Frontier Foundation. "Why shouldn't the cy-près be $100 million?" Judge Seeborg reportedly asked laywers during a two-and-a-half hour hearing yesterday, citing claims by Facebook that changes to the Sponsored Stories feature could cost it up to $103 million in lost revenue.

Plaintiffs in the case assert that the company did not provide adequate warning before it introduced Sponsored Stories and does not provide any real means of opting out, contravening California law. It is not yet clear when Judge Seeborg can be expected to reach a final decision on the settlement — Wired quotes him as saying, "I'm not going to approve it today. I'm going to have to give it a little bit of thought."