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Update: Netflix Pays $9 Million To Settle Video Privacy Lawsuit

Netflix (NSDQ: NFLX) disclosed this afternoon that it will pay to settle nationwide claims that it illegally retained customers’ rental histories. (Updated with Netflix statement)

The settlement, disclosed in a securities filing, grows out of a 2011 lawsuit that accused the company of violating the Video Privacy Protection Act and California consumer laws. The VPPA forbids video rental agencies from disclosing customer information and also requires them to destroy certain data within one year.

In the lawsuit, former customers said they discovered Netflix still had their personal information when they went to resubscribe to the service later on. This information includes viewing histories or “queues” that Netflix uses to predict what subscribers might want to watch next.

In a related legal filing, Netlix said it is working with plaintiffs’ lawyers to finalize the details of the $9 million settlement before seeking court approval. In these type of deals, lawyers typically take 25 percent of the award.

The VPPA has been an ongoing nuisance for Netflix. Congress passed the 1988 law in the VHS era after a newspaper published the video rental history of Supreme Court nominee Robert Bork; today, the language of the law also applies to newer technologies like streaming. The law, which forbids disclosing rental histories, is blocking Netflix from jumping onto Facebook’s frictionless sharing platform. The company is pushing Congress to amend the law.

UPDATE: Steve Swasey, VP of Corporate Communications for Netflix, provided the following statement:

Netflix has settled a lawsuit related to the company’s compliance with the Video Privacy Protection Act with no admission of wrongdoing. This matter is unrelated to the company’s concerns about the ambiguities contained in the VPPA, which keep Netflix from offering its U.S. members the ability to share their instant watching information with their Facebook friends, an experience Netflix members currently enjoy in 46 other countries.

Last year, streaming radio service Pandora (NYSE: P) tripped over a similar state law in Michigan where it is being sued for disclosing subscribers’ playlists.

4 Responses to “Update: Netflix Pays $9 Million To Settle Video Privacy Lawsuit”

  1. Kimberly A Krall

    I was sent and returned the form for this class action suit and have yet to hear anything since. What is going on and when will such said moneys be rewarded?
    Kimberly A.Krall

  2. Storing your video history isn’t a privacy issue (customer ledgers are kept by businesses and are stored for a long time, what’s the difference with film purchases). Besides I’m pretty sure the users agreed to it when they signed up.

    • Ya, this was just a money grab that utilized an outdated law.  I mean, who cares that Netflix has your history on file?  I’m glad they do.  If I quit Netflix and came back later I’d be happy to see that they kept all my old preferences/history/queue/etc. 

      The VPPA is outdated, it was passed in the 80s after Robert Bork’s video rental history was brought up at his Supreme Court confirmation hearings.   There wasn’t anything embarrassing or scandalous about Bork’s rental history, but I think a lot of other people panicked that their own history would be made public.  But now it’s being applied to Netflix/Blockbuster storing information and sharing it with Facebook or other social media applications. 

      Can’t feel bad for Netflix though, if you have a huge company, you should know the laws on this stuff.