Facebook Must Again Face User Fraud Claims Over Data

Facebook Inc. (FB) must again face user fraud claims over disclosure of their online activities while an appeals court spared the company from allegations it and Zynga Inc. (ZNGA) violated privacy laws.

The U.S. Court of Appeals in San Francisco revived Facebook users’ claims that the social network’s alleged dissemination of information about their online activities defrauded customers and breached its user agreement.

Privacy cases against Facebook, Google Inc. (GOOG) and other Internet companies have multiplied as users have become aware of how much of their personal information is being disclosed. Google faces privacy suits over its Street View feature and Gmail e-mail service after it failed to persuade federal judges in California to dismiss claims attacking its data collection.

Other “courts have rejected breach-of-contract claims,” Kassra Nassiri, an attorney for Facebook users, said of yesterday’s rulings. “This is a very important decision.”

Facebook is stepping up efforts to show it’s taking concerns about privacy and data usage seriously as it seeks to keep its more than 1.2 billion users active on its service. The appeals court ruled in two cases, upholding lower-court decisions that the companies didn’t violate federal privacy laws.

Photographer: Erin Lubin/Bloomberg

Facebook Chief Executive Officer Mark Zuckerberg. Close

Facebook Chief Executive Officer Mark Zuckerberg.

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Photographer: Erin Lubin/Bloomberg

Facebook Chief Executive Officer Mark Zuckerberg.

Some of the lawsuits’ privacy claims are based on practices and policies that the companies Facebook and Zynga have since changed, lawyers said at a January hearing.

Facebook Changes

In 2010, Facebook said it acted to prevent user information from being passed to outside companies after some third-party software applications on its platform transferred user ID numbers in violation of company policy.

The company, based in Menlo Park, California, agreed in 2011 to a settlement with the Federal Trade Commission over complaints it failed to protect members’ privacy or disclose how their data could be used. Under the agreement, Facebook is barred from making deceptive claims about its privacy procedures and also must undergo independent reviews of its practices.

In November, Facebook removed language criticized by consumer-advocacy groups about how teens’ content on the website can be used in ads as the company completed changes to its user privacy policies. The revised user privacy policies went into effect that month.

“We are pleased that the court affirmed the dismissal of the plaintiffs’ federal and state statutory claims,” Debbie Frost, a Facebook spokeswoman, said in an e-mail.

Stephanie Hess, a spokeswoman for San Francisco-based Zynga, didn’t immediately respond to an e-mail after regular business hours yesterday seeking comment on the ruling.

‘Privacy Promises’

In their complaint, Facebook users said the social network “automatically and surreptitiously” disclosed to advertisers information about them when they clicked on ads and how they were using the website, “contrary to Facebook’s explicit privacy promises.”

The appeals court yesterday also upheld a lower-court judge’s dismissal of users’ unfair competition and consumer protection claims against Facebook and privacy claims against it and Zynga, which pioneered social games on Facebook. The three-judge panel said the users failed to allege that Facebook or Zynga disclosed the content of communications, a requirement to allege a violation of the U.S. Electronic Communications Privacy Act.

Disclosure of personally identifiable information, such as users’ Facebook identities and website addresses, is allowed under the law, the judges said.

“The information allegedly disclosed by Facebook and Zynga is record information about a user’s communications, not the communication itself,” the panel said.

The cases are In Re Facebook Privacy Litigation, 12-15619, and In Re Zynga Privacy Litigation, 11-18044, U.S. Court of Appeals for the Ninth Circuit (San Francisco).

To contact the reporter on this story: Karen Gullo in federal court in San Francisco at kgullo@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Joe Schneider

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