Facebook settled a proposed class-action lawsuit based on the principle that its sponsored stories turn its users into spokespeople and, as such, they should be compensated. Terms were not disclosed.

Sister blog Inside Facebook reported the settlement, saying that the plaintiffs of Fraley et al v. Facebook (see below) based their claims on California’s Right of Publicity Statute, which prohibits the use of names, voices, signatures, photographs, or likenesses for advertising without that person’s consent.

Facebook’s defense, according to Reuters: The plaintiffs are considered public figures to their friends, and their actions on the social network are newsworthy.

Readers: Was Facebook smart to cut this case off before it could impact a major part of its advertising plans going forward?

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