Redbox, the automated video store that allows customers to rent movies from self-service kiosks, has become the target of litigation due to its consumer information retention practices. Redbox has maintained a policy of collecting consumer credit card information, billing addresses, and video viewing preferences whenever consumers rent videos from Redbox kisosks, and subsequently stores that information in internal databases for an indefinite period of time. Redbox failed to make clear to consumers that the company retained such personal information.
In Sterk v. Redbox, plaintiffs filed a class action lawsuit against the video retail company, claiming that Redbox’s policy of storing consumers’ personal information without first obtaining user consent was in violation of the § 2710(e) of the Video Privacy Protection Act (VPPA). The plaintiffs argued that since Redbox kept such records for an indefinite period of time, and consumers’ transactions with Redbox necessarily end after twenty-five days (when the video is due back), Redbox’s consumer information retention policies violated the VPPA.
VPPA was ratified by Congress back in 1988, and prohibits video rental service providers from maintaining and/or disclosing consumers’ rental history without consent. The Plaintiffs allege violation of the Act because Redbox retained (though not necessarily disclosed) such information. The relevant part of the bill reads: “A person subject to this section shall destroy personally identifiable information as soon as practicable, but no later than one year from the date the information is no longer necessary for the purpose for which it was collected and there are no pending requests or orders for access to such information…” (emphasis added).
While the court did not rule on whether Redbox in fact violated the VPPA, the court did deny Redbox’s motion to dismiss the allegations. The court first clarified that the bill creates a private right of action against video rental providers for any violation of the statute; not just § 2710(d), which prohibits providers from disclosing such information. More significantly, by not dismissing the suit for a failure to state a claim, the court’s decision to deny dismissal can be read as advancing the following proposition: mere retention of consumer information by video rental service providers, absent user consent, violates the VPPA even if the video rental service providers do not disclose such information.
"Mere retention of consumer information by video rental service providers, absent user consent, violates the VPPA even if the video rental service providers do not disclose such information."
Redbox maintained that the statute permits retention of consumer information for marketing and advertising purposes so long as providers offer consumers in a “clear and conspicuous” manner the opportunity to opt-out of such data collection. Redbox did provide a link to their “terms and conditions” at each of their kiosks. Nevertheless, while the court did not rule whether such a methodology satisfied the “clear and conspicuous” standard (because it was only deciding on a motion to dismiss), the opinion reads that in subsequent litigation federal courts will not find the standard met by Redbox’s current practices.
The ramifications of this ruling seem to point directly to online video rental service providers. Indeed, a similar class action suit has already been filed against Netflix, an online video streaming provider. Since the VPPA has been interpreted as granting a private right of action for failure to destroy consumer information, providers who merely retain consumer information are now exposed to the risk of costly class action suits. Further, the court in Redbox read the statute’s language of “as soon as practicable” very narrowly, essentially compelling the video rental industry to dispense with any and all consumer information as soon as possible. Following Sterk v. Redbox, it seems that if video rental companies wish to retain consumer viewing history information, they must disclose such practices to consumers in a manner far more transparent than the video rental industry currently provides.
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