Vizio Settles Smart TV Suit for $17M

Advertising Law

After previously reaching a $2.2 million deal with the Federal Trade Commission (FTC) and the New Jersey attorney general (AG), Vizio has agreed to pay an additional $17 million to settle consolidated litigation based on the company’s privacy practices with regard to its smart television sets.

Multiple plaintiffs sued Vizio following an investigative report that revealed the company’s smart TVs collected and shared customers’ viewing habits with advertisers without notice or consent. The plaintiffs alleged Vizio tracked TV viewers and gathered information including ZIP codes, MAC addresses, IP addresses and product model numbers, along with viewing data points about consumers. The cases were consolidated in a California federal court, and the parties engaged in motion practice as well as initial discovery.

During the process, Vizio agreed to pay $2.2 million to the FTC and the AG for installing software and collecting viewing data on 11 million consumers without their knowledge or consent. The company also agreed to make policy changes.

Once the court in the consumer class action denied Vizio’s motion to dismiss, the parties negotiated a settlement.

The agreement provides that Vizio will establish a nonreversionary $17 million fund. After court-approved expenses, service awards of up to $5,000 for each of the six named plaintiffs and attorneys’ fees (not to exceed 33 percent of the total fund, or roughly $5.6 million) are paid, the remainder will be used for proportional monetary payments to class members who submit a claim.

The deal also includes injunctive relief. Pursuant to the consent decree with the FTC and New Jersey AG, Vizio made revisions to its on-screen disclosures regarding its practices for collecting and sharing data. The company agreed to display on the TV screen—separate from its privacy policy, terms of use or similar disclosures—a notification that provides customers with the option to accept collection of their viewing data.

Further changes to the on-screen disclosure were agreed upon as part of the settlement agreement, including a “quick-start” guide with a statement that declining to have data collected “will not change the functionality of your device.” Finally, Vizio promised to delete all viewing data collected during the class period of February 1, 2014, to February 6, 2017, with confirmation by an auditor that the deletion was successful.

If all 16 million class members were to file an approved claim, they would receive just 62 cents each. The plaintiffs’ expert opined that the value of the injunctive relief is approximately 50 cents per class member. So if 100 percent of the class members were to make claims, each would receive $1.12 in benefits, the plaintiffs told the court. But assuming a “more realistic” claims rate of 5 percent, the per class member recovery would jump to $13 ($12.50 from the settlement fund and 50 cents in injunctive relief). As the plaintiffs’ expert calculated that actual harm per consumer was in the range of 78 cents to $4.76, the proposed class payment amounts “greatly exceed the maximum value of actual harm per consumer, per TV.”

Given the “many strengths” of the settlement and the “real risk” of achieving far less after trial, the plaintiffs urged the court to approve the deal.

“Plaintiffs and class counsel are proud to present this settlement agreement to the Court because it is restorative,” according to the memorandum in support of preliminary approval of the settlement. “The revenue that Vizio obtained from the collection and licensing of viewing data during the class period will be fully disgorged; and in turn settlement class members will receive compensation comfortably within the range of reasonableness for their claims. Just as important, Vizio’s collection of viewing data by default ended as of February 2017. Vizio’s disclosures were revamped—and will be further revised as a result of this settlement. And Vizio will destroy the remaining contested viewing data in its possession.”

To read the memorandum in support of preliminary approval of the proposed settlement in In re: Vizio, Inc. Consumer Privacy Litigation, click here.

Why it matters: Despite the low payout to class members ($13 per plaintiff, assuming a claims rate of 5 percent), the plaintiffs touted the deal as “an excellent outcome for the class,” particularly since Vizio would argue that an arbitration agreement would apply if a class were certified and the plaintiffs would face a potentially problematic Ninth Circuit decision in Eichenberger v. ESPN, Inc.



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