Press Release

NEWARK – Attorney General Christopher S. Porrino and the Division of Consumer Affairs today announced that Smart TV manufacturer VIZIO, Inc. ("VIZIO") and its subsidiary VIZIO Inscape Services, LLC, ("Inscape") have agreed to pay the State and the Federal Trade Commission (FTC) $2.5 million and change their business practices to settle allegations they violated consumer protection laws by surreptitiously tracking consumers' television viewing habits and selling the information to marketing companies and data brokers.

The settlement ends parallel investigations conducted by the Division and the FTC into the use of data-collecting technology installed on VIZIO's "Smart TVs." The State obtained $1 million and the FTC obtained $1.5 million in the settlement.

In a joint Complaint filed in the United States District Court for the District of New Jersey, the State and the FTC alleged that VIZIO and Inscape violated state and federal laws by failing to effectively inform consumers that VIZIO smart televisions were continuously collecting and storing information about their viewing habits, and that the data was being sold to third parties for marketing purposes.

"New Jersey residents enjoying television in the privacy of their own homes had no idea that every show they watched, every movie they rented, every commercial they muted was being secretly tracked by the defendants who then exploited that personal information for corporate profit, as we allege," said Attorney General Porrino. "This kind of allegedly deceptive behavior is not only against the law; it is an egregious invasion of privacy that won't be tolerated."

"By allegedly failing to effectively disclose the surveillance technologies embedded in VIZIO televisions and what they were being used for, the defendants denied consumers the chance to make an informed choice about keeping their activities private," said Steve Lee, Director of the Division of Consumer Affairs. "This settlement not only holds the defendants accountable for their alleged deceptive practices, it requires them to destroy the data they gathered without consumers' consent, and to revise their business practices to protect consumers from future privacy breaches."

The Complaint alleges that since February 2014, VIZIO has manufactured televisions that continuously track what consumers are watching, and transmit that information to the defendants on a second-by-second basis through software developed by Inscape. The same software was remotely installed on VIZIO televisions previously sold without it.

Unbeknownst to viewers, the software was allegedly gathering detailed information about the programs and commercials they watched, how long they watched them, and what channels they were on. The data was collected from cable or broadband service providers, set-top boxes, external streaming devices, DVD players, and over-the-air broadcasts for permanent storage. The software also periodically collected other information about the television, including IP address, wired and wireless MAC addresses, Wi-Fi signal strength, nearby Wi-Fi access points and other items. VIZIO then sold the information to third-parties through licensing agreements, on a television-by-television basis, according to the allegations.

VIZIO sold the data for three main uses: to measure audience viewing habits, to evaluate the effectiveness of advertising campaigns, and to target advertising to particular consumers based on their viewing activities.

The Complaint alleges the defendants violated the New Jersey Consumer Fraud Act and the Federal Trade Commission Act by engaging in unfair, deceptive and unconscionable business practices that include:

• Collecting and sharing sensitive data without consumers' consent through a medium that consumers would not expect to be used for tracking.
  
• Causing substantial injury to consumers that is not outweighed by countervailing benefits to consumers or competition, and is not reasonably avoidable by consumers themselves.
  
• Failing to adequately disclose that the "Smart Interactivity" feature comprehensively collected and shared consumers' television activity which the defendants then provided to third-parties.
  
• Representing either expressly or by implication, that they would offer program offers and suggestions to consumers with "Smart Interactivity" enabled on their televisions when, in fact, they did not.
  

Under the terms of the settlement, VIZIO and Inscape agreed to pay the State $915,940 in civil penalties and $84,060 in attorney fees and investigative costs. The defendants also agreed to destroy consumer viewing data collected prior to March 1, 2016, prominently disclose to consumers the type of data that will be collected by the "Smart Interactivity" feature, and obtain consumers' affirmative express consent before collecting their viewing information. In addition, the settlement calls for Vizio to establish, implement, and maintain a comprehensive privacy program to address privacy risks related to the development and management of new and existing products and services for consumers, and to protect the privacy and confidentiality of information collected from a VIZIO internet-connected device. The settlement also requires Vizio to obtain an initial and biennial assessments of the privacy program by a qualified third-party within one year, submit a notice detailing their compliance with every provision in the Order; and for the next 20 years create and maintain records pertaining to the collection, maintenance, or storage of personal information from or about consumers. The State agreed to suspend $300,000 of the civil penalty if the defendants comply with the terms of the settlement.

Investigators Brian Morgenstern and Christopher Spaldo of the Division of Consumer Affairs' Cyber Fraud Unit conducted this investigation.

Deputy Attorneys General Kent D. Anderson, Elliott M. Siebers and Russell M. Smith, Jr., and Assistant Attorney General John M. Falzone III, represented the State of New Jersey in this matter. Former Deputy Attorney General Glenn Graham also contributed to the investigation.

Jennifer Archie and Scott Jones of Latham & Watkins LLP represented the defendants in this matter.

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