Bloomberg Law: Privacy & Data Security brings you single-source access to the expertise of Bloomberg Law’s privacy and data security editorial team, contributing practitioners,...
By Sara Merken
Vizio Inc. has agreed to pay $17 million to settle a lawsuit over allegations that the smart TV maker collected and sold customers’ viewing histories to third parties without their knowledge or consent.
Under the proposed settlement, which is subject to court approval, Vizio will set up a fund to pay class members who submit a claim. Vizio will also make further changes to its on-screen disclosure of data collection practices and will delete all viewing data collected before Feb. 2017.
The case is a reminder to companies to implement straightforward privacy policies and incorporate privacy into the design of a product that collects massive amounts of consumer data, privacy attorneys told Bloomberg Law.
“Privacy lawyers everywhere would likely agree that this case highlights the value of investing in clear privacy and data usage policies that consumers affirmatively agree to,” Michael Hazzard, a cybersecurity and privacy partner with Jones Day in Washington, told Bloomberg Law in an email.
Internet-connected devices are growing in popularity and can collect real-time data about consumers’ habits. About 74 percent of U.S. households with televisions have at least one Internet-connected TV device, which includes smart TVs, streaming devices, and connected video games, according to a June 2018 study by the Leichtman Research Group.
The U.S. District Court for the Central District of California is set to hold a Dec. 7 hearing to consider preliminary approval of the proposed settlement.
Vizio said in a statement that after settling a different case with the FTC in 2017, it had “adopted clear, prominent and explicit viewing data disclosures that are now widely considered the most consumer-friendly disclosures in the television industry.”
“While VIZIO enabled detection of content displayed on VIZIO Smart TVs and information unique to the unit including IP address, it never connected such information to an individual’s name, address or similar identifying information,” Vizio said in the statement. The company said that viewing data helps advertisers and programmers create content that aligns with consumers’ preferences and interests.
ProPublica reported in November 2015 that Vizio smart TVs tracked what shows were watched and gave the information to advertisers. Multiple class action complaints were filed in federal courts around the country after the story appeared, which were later consolidated and sent to the California federal court under federal Judge Josephine Staton.
Plaintiffs filed a consolidated class action complaint against Vizio in August 2016 on behalf of a nationwide class of people who purchased Vizio smart TVs and on behalf of subclasses of consumers in multiple states. The plaintiffs alleged violations of federal and state privacy laws and state consumer protection laws.
The plaintiffs alleged that Vizio installed automatic content recognition software on 16 million of its smart televisions that collected information about the shows consumers’ watched and other information, such as the TV’s internet protocol address and Wi-Fi signal strength, to sell to advertisers, without user consent, between Feb. 2014 and Feb. 2017.
The case “is precedent setting in that the plaintiffs aggressively pushed claims under both consumer privacy laws but also and more interestingly under mini-FTC acts on unfair and deceptive practices at the state level in California, Florida and Massachusetts,” Cheryl Falvey, co-chair of Crowell and Moring LLP’s advertising and product risk management group in Washington, told Bloomberg Law in an email.
Staton in March 2017 largely rejected Vizio’s motion to dismiss the case. Vizio had argued to dismiss claims under the federal Video Privacy Protection Act, contesting whether the company should be considered a video tape service provider under the law and whether the company disclosed what is defined as personally identifiable information. Plaintiffs filed a second consolidated complaint. Vizio again moved to dismiss the claims.
Companies that manufacture and sell smart devices should get affirmative consent from consumers before collecting or selling data, privacy attorneys said.
“Some of these cases need to get beyond a voluntary settlement to get clearer guidance from the courts. Until then, this case is yet another reminder that obtaining affirmative consent at the time of sale is the best practice for any consumer product company,” Falvey said.
Makers of smart devices that collect large amounts of consumer information should also consider incorporating privacy and cybersecurity measures into the product’s initial design in order to mitigate risk from security vulnerabilities, attorneys said.
“The push to get a connected device to market needs to be balanced against privacy and security risks,” said Nicholas Merker, Indianapolis-based partner and co-chair of Ice Miller LLP’s data security and privacy practice.
Gibbs Law Group LLP and Cotchett, Pitre & McCarthy, LLP represented the plaintiffs. Akin Gump Strauss Hauer & Feld LLP represented Vizio.
The case is Vizio, Inc. Consumer Privacy Litigation, C.D. Cal., Docket No. 8:16-ml-02693, motion for preliminary approval filed 10/4/18.
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