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Netflix Pays $9 Million Settlement in Video Privacy Case

13 Feb, 2012 By: Erik Gruenwedel

Netflix has agreed to pay $9 million in settlement of litigation regarding its compliance with the Video Privacy Protection Act.

The Los Gatos, Calif.-based rental service said the settlement — disclosed in a late Feb. 10 regulatory filing — was recognized as an expense in its consolidated statement of operations for the fiscal year ended Dec. 31.

In other words, Netflix reduced its fourth-quarter net income to $35.2 million, down 14% from previously reported net income of $40.7 million.

The settlement, which isn’t an admission of wrongdoing by Netflix and must be approved by the court, relates to a 2011 class-action law suit filed in Northern California on behalf of Jeff Milans and Peter Comstock, both residents of Virginia.

In the suit, the plaintiffs alleged Netflix violated provisions of the 1988 Video Privacy Protection Act that disallows video rental services from accessing subscriber information up to two years after cancelation.

Separately, Netflix last month lobbied Congress about revising the VPPA to enable software on Facebook that would allow domestic subscribers to share their rental histories with others.

In a statement, Netflix spokesperson Steve Sawsey said the settlement was unrelated to the company’s concerns about the ambiguities contained in the VPPA, which keep Netflix from offering its domestic subs the ability to share streaming information with their Facebook friends, an experience Netflix members currently enjoy in 46 other countries.

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