Second Complaint Against Vizio Alleges Privacy Violations of Its Smart TVs' Viewer-Tracking Feature
Vizio’s initial public offering filings at the SEC have given fodder to a second federal complaint in California in three weeks seeking class-action status on allegations that the viewer-tracking feature on Vizio smart TVs violates the federal Video Privacy Protection Act. The latest complaint, filed Wednesday in U.S. District Court in Santa Ana, California, differs from the first (see 1512060005), in that it names Cognitive Media Networks as a second defendant.
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Cognitive is the leading provider of real-time services powered by automatic content recognition (ACR) and supplies Vizio with “the software used to track and collect consumers’ information and viewing data” for its Inscape data services platform, the complaint said. That descriptor and the disclosure that Vizio on Aug. 10 paid about $50 million in cash to acquire the 90 percent of Cognitive it didn’t previously own were buried in an amended S-1 registration statement filed Aug. 31 at the SEC, but disclosed publicly by Vizio in no other manner. The Aug. 10 Cognitive buy followed Vizio’s filing of its initial S-1 registration statement by about two weeks.
In that July 24 S-1 filing (see 1507260001), Vizio said it licenses the ACR technology that’s embedded in the Inscape platform on a nonexclusive basis from a third-party vendor the filing didn’t name, but now is believed to be Cognitive. Vizio has spent the past several years “and significant resources building out technology integrations with marketing technology companies to facilitate the collection of data that ultimately will be used for the delivery of digital advertisements to television and online content audiences,” that filing said.
Throughout the IPO process, Vizio has boasted that the Inscape platform “collects, aggregates and stores data regarding most content displayed” on Vizio smart TV screens, “including content from cable and satellite providers, streaming devices and gaming consoles.” Inscape is capable of providing “highly specific viewing behavior data on a massive scale with great accuracy, which can be used to generate intelligent insights for advertisers and media content providers and to drive their delivery of more relevant, personalized content” through Vizio smart TVs, it has said,
In the various “risk factors” sections of its S-1 and the three amendments that followed, Vizio has cautioned that when it comes to Inscape, the company expects to “see an increase in legislation and regulation related to digital advertising, the use of location or behavioral data to inform advertising, the collection and use of Internet user data and unique device identifiers, such as IP address, and other data protection and privacy regulation.” It’s those and other Vizio risk advisories from the IPO filings that the newest complaint quotes from extensively to make the case that Vizio has acknowledged “potential liability under governing privacy laws.” Vizio representatives didn't comment.
One of the plaintiffs in the latest complaint, Dieisha Hodges, paid about $1,000 in December 2013 to buy a Vizio 55-inch smart TV from a Walmart in Oakland, California, the complaint said. The other, Simone Richardson, bought a 40-inch Vizio smart TV Aug. 23 for $398 from a Walmart in Lake of the Hills, Illinois, it said. When setting up the Vizio smart TVs, neither Hodges nor Richardson saw “any form of privacy notice,” nor does either recall “clicking on any button or link” attesting to having “agreed to any terms or conditions,” it said.
Though Vizio says the data it collects can’t be used to identify specific persons, tracers such as IP addresses or “media access control” (MAC) addresses can be used to identify a user’s personal information, “and are thus private information,” the complaint said. For example, a MAC address “is a unique identifier assigned to network interfaces for communications on a physical network segment,” it said. “Because MAC addresses are unique to each device, a device’s MAC address can be used to identify a person and track his or her location whenever that person passes a Wi-Fi hotspot. As such, the FTC has filed complaints against entities who mislead consumers over their ability to opt out of device-tracking technology that collects MAC addresses because they were never informed that they were being tracked at all.”
In court papers, the plaintiffs cited the specific FTC complaint against Nomi Technologies, a supplier of mobile-device tracking services to retailers, in which it alleged the company misled consumers with promises that it would provide an in-store mechanism for consumers to opt out of their MACs being detected and that detection wouldn't take place without their being informed. The complaint alleged those promises weren't true because no in-store opt-out mechanism was available, and consumers weren't informed when the tracking was taking place. Under a settlement with the FTC finalized in September, Nomi is prohibited “from misrepresenting consumers’ options for controlling whether information is collected, used, disclosed or shared about them or their computers or other devices, as well as the extent to which consumers will be notified about information practices,” the commission said in a statement.