Judge scrutinizes Facebook deal to end privacy lawsuit over ads

The loading screen of the Facebook application on a mobile phone is seen in this photo illustration taken in Lavigny May 16, 2012.

SAN FRANCISCO (Reuters) - Child rights advocates tried to convince a U.S. judge on Friday that a Facebook (FB.O) legal settlement did not go far enough to keep content created by minors out of the hands of advertisers.

Five plaintiffs filed a proposed class action against Facebook in 2011, saying the social networking giant's "Sponsored Stories" program shared user's "likes" of certain advertisers without paying them or allowing them to opt out.

The case has highlighted tension between privacy concerns and Facebook's drive to monetize user content.

Under the terms of a proposed settlement, Facebook will pay $20 million to compensate class members, and promised to give users more control over how their content is shared - changes which plaintiff lawyers estimate to be worth up to $145 million. Facebook charged advertisers nearly $234 million for Sponsored Stories between January 2011 and August 2012, court filings show.

U.S. District Judge Richard Seeborg in San Francisco preliminarily approved the settlement last year, but he still must give it a final sign-off."

At a hearing on Friday, Children's Advocacy Institute attorney Robert Fellmeth told Seeborg that no minors should have their content shared with advertisers. Seeborg did not say how he would rule, but said his role is only to say if the settlement is fair.

"My function here is not to craft the perfect policy for minors," Seeborg said.

Earlier this month, Facebook announced a retooling of its advertising product offerings and eliminated the term "Sponsored Stories," though the company can still share its members likes of different products. Facebook attorney Michael Rhodes said in court on Friday that the legal settlement would still cover those types of advertising practices.

Under the deal, impacted Facebook users can claim a cash payment of around $10 each to be paid from the settlement fund, and plaintiff lawyers are seeking $7.5 million in fees. Any money remaining would then go to charity.

Seeborg called the $145 million valuation of changes to Facebook's site "highly speculative." However, plaintiff lawyer Robert Arns said the changes were very significant. "We think it sets a new standard for all social media sites in the U.S.," Arns said.

The case in U.S. District Court, Northern District of California is Angel Fraley et al., individually and on behalf of all others similarly situated vs. Facebook Inc, 11-cv-1726.

(Reporting By Dan Levine; Editing by Bernard Orr)