Court Drops Facebook Ad Targeting Suit — What It Means for Hyperlocals

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Hyperlocal news publishers that depend on a targeted advertising may find some comfort this week after a federal court in San Jose, Calif., threw out a series of class action claims against Facebook relating to its advertising practices.

California users filed a class action lawsuit against Facebook on May 28, 2010, claiming that Facebook shared information about them with advertisers without their permission. According to the complaint filed in In Re: Facebook Privacy Litigation, Case No. 10-cv-02389-JW, users claimed that Facebook shared user IDs and other personal information when Facebook while sending “referral headers” back to its advertisers when users interacted with ads.

The users alleged that Facebook violated Federal Wiretap and Storage Communications laws, because Facebook disclosed data about the users stored on Facebook’s systems to advertisers without the users’ authorization. The users also claimed that Facebook breached a promise made by Facebook on its privacy policy, which provides “We do not share any of your information with advertisers (unless, of course, you give us permission).”

On November 22, 2011, Judge James Ware dismissed the claims, ruling that Facebook did not violate the federal laws because the users admitted that if they clicked on an advertisement, they expected Facebook to connect the user to the specific advertiser. “If the communications were sent to advertisers, then the advertisers were the addresses or intended recipients of those communications, and Defendant (Facebook) was permitted to divulge the communications to them,” Judge Ware wrote in his opinion.  Judge Ware also dismissed the users’ claim that Facebook breached its contract with the users, finding that the users did not claim any specific monetary loss from the alleged breach.

For hyperlocal news publishers, the problems raised in the Facebook lawsuit could be averted if publishers, and their advertisers and ad networks:

  • Disclose what information is collected from the user;
  • Disclose how that information is shared;
  • Disclose whether cookies, web beacons and pixels tags are used and for what purpose;
  • Disclose whether advertisers use cookies and other tracking devices and whether such data may be used for targeted advertisements; and
  • Provide users with options to control targeted ads.

Such disclosures may help avert potential legal and regulatory risks beyond those faced by Facebook. The Federal Trade Commission and Congress are considering whether to regulate targeted advertising practices. If regulations are coming down the pipeline, hyperlocal news publishers should take steps now to ensure they are using best practices for targeted ads.

The Federal Trade Commission issued a report in December 2010 suggesting that the industry implement a “Do Not Track” mechanism for targeted advertising. “The most practical method would probably involve the placement of a persistent setting, similar to a cookie, on the consumer’s browser signaling the consumer’s choices about being tracked and receiving targeted ads,” the FTC announced  in its release.

The report has spawned new bills in Congress to regulate targeted advertisements. The new bills include  the “Do Not Track Me Online Act,” introduced by Rep. Jackie Speier (D-CA), the “Best Practices Act” introduced by Rep. Bobby Rush (D-IL), the “Commercial Privacy Bill of Rights Act of 2011,” introduced by Senators John Kerry (D-MA) and John McCain (R-AZ), and Senator John Rockerfeller’s (D-WV) “Do Not Track Online” bill. These bills, if passed, would require in some form that consumers are provided more options to control the tracking of their online behavior.

The industry is trying to convince law makers that a self-regulatory strategy is a practical alternative to government imposed regulation. The Digital Advertising Alliance has teamed up with the Better Business Bureau, the Network Advertising Alliance and the Interactive Adverting Bureau to promote the industries’ adoption of the DAA’s Self-Regulatory Program for Online Behavioral Advertising. Publishers and advertisers would voluntarily post an icon  with advertisements that would give user the ability to chose whether data is collected and used for online behavioral advertising purposes.

Here are few options for publishers while the regulatory scheme remains in flux. Hyperlocal news publishers can determine whether their advertising networks participate either in the DAA’s program or participate in the Network Advertising Initiative opt-out program, or ask if such advertisers would participate in the program (many offer it already). Advertisers and ad network that participate in these program provide users with a more accessible and easy approach to opt-out of targeted advertising.

Next, hyperlocal news sites can review their privacy policies to ensure that the policies amply disclose the publisher’s and its advertiser’s tracking and targeting activities. For example, hyperlocal publisher provides the following disclosures about its advertising practices in its privacy policy:

  • Examiner’s policy states that it uses third parties to serve ads, and these ad networks may use cookies, web beacons and pixel tags to target adverting.
  • Examiner provides a link to its advertising networks, where users can take options to opt out of tracking by these entities.
  • Examiner directs users to the Network Advertising Initiative opt-out tool, where users can select various options about targeted advertising practices by NAI participants.
  • Examiner discloses that it may share certain user data with “carefully selected third parties” for purposes that include targeting advertisements.

Although pending legislation may alter the way publishers and advertisers can target ads, hyperlocal news publishers should prepare now for pending changes and embrace current best practices in providing users with transparency on targeted advertising.

These suggestions are not comprehensive and should be reviewed with you counsel from time to time based on potential regulations, laws or industry standards that may evolve in the future. This column is for general information purposes only. Information posted is not intended to provide legal advice.

Brian Dengler is an eMedia attorney and journalist who covers legal issues in eMedia. He is a former Vice President of AOL, a former newspaperman and EMMY-winning TV journalist. He teaches eMedia management as an adjunct at Kent State University.