Judge rejects Facebook settlement over ad feature

A US judge has rejected Facebook's $US10 million ($AU9.6 million) settlement proposal to resolve allegations the company had violated member rights through its 'Sponsored Stories' feature.

US District Judge Richard Seeborg cited several concerns with the proposed settlement on Friday, including a request for more information on why the agreement does not award any money to members.

Facebook had agreed to pay $10 million in legal fees and donate $10 million to charity, according to court documents, rather than any of the five Facebook members who had begun the suit.

Seeborg said the company and attorneys for the plaintiffs could try to modify their agreement to address his concerns.

"We continue to believe the settlement is fair, reasonable, and adequate," a Facebook spokesman said in a statement.

"We appreciate the court's guidance and look forward to addressing the questions raised in the order."

Representatives for the plaintiffs could not immediately be reached for comment.

Five members of the social network had filed a lawsuit seeking class-action status against Facebook, saying its Sponsored Stories feature violated California law by publicising users' "likes" of certain advertisers without paying them or giving them a way to opt out.

The company was alleged to have implemented users’ likes of advertisers without compensating them, or allowing them to opt out of taking part in the “Sponsored Story” advertising.

User names and profile pictures were also used in advertsing.

The case involved 100 million potential class members.

As part of the proposed settlement, Facebook agreed to give members more control over how their personal information was used.

In the opinion of one economist hired by the plaintiffs, contained in a court filing, the value to Facebook members resulting from the changes is about $103 million.

(Reporting By Dan Levine; Editing by Gary Hill)