Netflix Announces $9M Class Action Settlement

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UPDATE: A federal judge granted final approval to the $9 million Netflix Privacy Class Action Lawsuit Settlement on March 18, 2013.

Netflix disclosed Friday afternoon that it will pay $9 million to settle a nationwide class action lawsuit charging the company with illegally retaining customers’ rental histories.The Netflix settlement will resolve a 2011 privacy class action lawsuit accusing the company of violating the Video Privacy Protection Act and California consumer protection laws. The VPPA forbids video rental agencies from sharing information about what their current and former customers have been watching, and also requires them to destroy certain data within one year “from the date that the information is no longer necessary for the purpose for which it was collected.”

Netflix was violating the VPPA by retaining records of the DVD and Internet videos that its subscribers watched for up to two years after they cancelled their subscriptions, the class action lawsuit claimed.

As a result, Netflix maintains a veritable digital dossier on thousands, if not millions, of former subscribers. These records contain not only the former subscriber’s credit card number, username and password, as well as billing/contact information, but also a highly detailed account of the individual’s video programming viewing history,” the Netflix class action lawsuit said.

Netflix said it retains former customers’ viewing histories so it can restore their old video queues and make better recommendations if they reactivate their subscriptions.

The Netflix class action settlement was disclosed last Friday in a securities filing. Netflix said in a statement it did not admit any wrongdoing in agreeing to the class action settlement.