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How Vizio Was Nailed by the FTC for Secretly Tracking TV Viewers

Popular TV maker Vizio went too far in secretly tracking its customers viewing habits and must pay a $2.2 million fine to settle charges it misled the public.

The company installed software on some 11 million Internet-connected TV sets it had sold to track customers’ detailed viewing habits, linked that data with specific household demographic information and sold the information to third-party marketers, according to a complaint released by the Federal Trade Commission and the New Jersey Attorney General’s office on Monday. But the company failed to notify or seek permission from customers.

Vizio emphasized that it had never connected the viewing data with personally identifiable information, such as names. “Today, the FTC has made clear that all smart TV makers should get people’s consent before collecting and sharing television viewing information and Vizio is now leading the way,” general counsel Jerry Huang said in a statement.

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Under the settlement agreement, Vizio was ordered to destroy all of the viewing data it collected before March 1, 2016 that lacked adequate disclosures. The company also had to improve its notifications to customers and create a comprehensive privacy program.

The data collection program started in February 2014, with software that came pre-installed on all Vizio’s smart TV units after that date, with no on-screen notification to customers.

Also at that time, Vizio sent a software update to smart sets sold in the prior four years to add the tracking software. Although the update prompted a pop-up message on the TV sets, the message said that Vizio’s privacy policy had changed and offered a web site address with more information. In its settings menu on the TVs, the data collection feature was referred to as “smart interactivity” with a description only stating it “enables program offerings and suggestions.”

“Neither description provided information about the collection of viewing data,” the FTC noted in its complaint. “Defendants have not provided any ‘program offers or suggestions’ or ‘program-related information’ for most televisions for more than two years, and did not update the disclosures.”

The advanced data collection software analyzed the pixels displayed on the Vizio screens and matched the content against a database of television, movie and commercial content. That allowed Vizio to track what was being viewed from all sources, from cable TV boxes to DVD players to Internet set-top box players like Apple TV (AAPL).

The program evolved over the past three years and grew more intrusive, according to the FTC. Starting in 2014, Vizio supplied data about its customers’ viewing habits to third parties for audience measurement of various shows. In 2015, the program expanded to include assessing the effectiveness of advertising. That program could match what a customer watched on a Vizio TV with the customer’s online activity like visiting an advertiser’s web site.

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Then in 2016, Vizio began providing data to target advertisements to customers on other digital devices they used based on their television watching habits.

Although the company’s contracts prohibited third-party data buyers from identifying its customers by name, it did allow identification of sex, age, income, marital status, household size, education, home ownership, and household value.