Facebook said on Wednesday that it had agreed to pay $550 million to settle a class-action lawsuit over its use of facial recognition technology in Illinois, giving privacy groups a major victory that again raised questions about the social network’s data-mining practices.

The case stemmed from Facebook’s photo-labelling service, Tag Suggestions, which uses face-matching software to suggest the names of people in users’ photos.

The suit said the Silicon Valley company violated an Illinois biometric privacy law by harvesting facial data for Tag Suggestions from the photos of millions of users in the state without their permission and without telling them how long the data would be kept. Facebook has said the allegations have no merit.

Under the agreement, Facebook will pay $550 million to eligible Illinois users and for the plaintiffs’ legal fees. The sum dwarfs the $380.5 million that the Equifax credit reporting agency agreed this month to pay to settle a case over a 2017 consumer data breach.

Facebook disclosed the settlement as part of its quarterly financial results, in which it took a charge on the case. The sum amounted to a rounding error for Facebook, which reported that revenue rose 25 per cent to $21 billion in the fourth quarter.