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A class-action suit has been filed in the U.S. District Court for the Northern District of California against Facebook and a host of other companies including Blockbuster, Fandango, and Overstock, reports NetworkWorld. The suit has accused Facebook of violating online privacy due to its controversial beacon ad system.

Facebook’s beacon ad system was designed to allow Facebook to share information about the activities of its users and their friends with other companies to aid in advertising.

Whenever a user with beacon turned-on on his page bought something from an advertising partner, he had a message appeared on his page that would tell everyone visiting his page that he has made the said transaction. This is a ploy to lure others with similar interests in doing the same.

The lawsuit complains that Facebook started gathering information about its users without asking them about it.

By the time any user was notified that Facebook was (at a minimum), an observing party to the transaction, and that Facebook was asking for an approval to publicly broadcast identifying information regarding the event, personally identifying information had already been communicated to Facebook.

In addition to this, the program was an opt-out system but Facebook made it as hard as possible for its users to opt out of it. This was done by making the UI un-intuitive and complex. Facebook also gathered information information on other users, who were not registered on Facebook but were conducting business on third party sites.

What this means is that every time a person bought a toy from Overstock.com this information was sent to Facebook, irrespective of the fact that the user was registered on Facebook or not. According to the lawsuit:

Thus, non-Facebook persons who utilized the Facebook Beacon Activated Affiliate Websites were not told that their transaction, and indeed, every transaction they engaged in upon the Website was being communicated to a third party (Facebook) with whom they had no relationship whatsoever.

The suit has requested the court to order Facebook to delete any and all data that it has collected without the user permissions and also to return all money that it has minced by doing so.

It seems that Facebook is in for a wild ride here.

[via Silicon Alley Insider]