Netflix settles customer record privacy case for $9 million

A class-action lawsuit alleging streaming video giant Netflix retained customer records for two years after service cancellation has ended with the company admitting no wrongdoing, but paying out a hefty $9 million to make the case go away.

The Washington Post reported that the massive out-of-court settlement has led to Netflix downwardly adjusting its fourth quarter net income by 14 percent for a loss of $5.5 million.

According to the site, Peter Comstock and Jeff Milans, both of Virginia, alleged that Netflix had violated the Video Privacy Protection Act – a 1988 law that banned video rental services from revealing their customers’ rental records. The pair argued that under the VPPA, Netflix had no right to maintain records of what they had rented and streamed for more than one year, but did just that for two years.

In a write-up on the VPPA, the non-profit digital rights advocacy group Electronic Privacy Information Center (EPIC) claimed that a 2011 Netflix-supported amendment seeks to “weaken the consent provision of the VPPA by diminishing the ability of users to control the use and disclosure of their personal information.”

In other words, the original VPPA protected consumers from potentially having their personal information misused by businesses they once patronized, while the amendment, H.R. 2471, could potentially grant more leeway to how long companies can retain such information, along with whom they could share it.

A lawyer for Netflix told Congress last month that passing the amendment would allow the company to bring a Facebook app currently only available for Canadian and Latin American members to the U.S. The app allows Netflix members to share with Facebook friends the movies and TV shows they’re currently viewing.

Sponsored by Rep. Robert Goodlatte (R-VA), the amendment was passed by the House of Representatives last December, with a Senate vote pending. (via Hacking Netflix)