February 13, 2012, 12:03 PM

Netflix pays $9 million to settle class action privacy lawsuit

The lawsuit alleged Netflix violated customer privacy by retaining consumers' viewing histories.

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DVD rental and streaming video retailer Netflix Inc. has agreed to pay $9 million to settle a class action lawsuit alleging it violated the Video Privacy Protection Act, according to a Securities and Exchange Commission document Netflix filed late Friday.

The class action complaint filed last year in the Northern District of California alleges that Netflix violated consumers’ privacy when it kept personal information, such as credit card data and video viewing history, on file after shoppers canceled their subscriptions, which violates a portion of the Video Privacy Protection Act.

Passed in 1988, the law was designed to prevent video rental services from sharing information about what customers were watching. By keeping this data on file after subscriptions were cancelled, Netflix was able to better recommend new titles if customers ever re-engaged their memberships, according to the filing.

Netflix, No. 13 in the Internet Retailer Top 500 Guide, will pay the settlement this year, according to the filing.

Netflix was not immediately available for comment.

Last month, the retailer was also sued by investors for securities fraud. That suit alleges company executives misled investors and artificially inflated the stock price.

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