MoviePass settles fraud and data security flaws with FTC

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On Monday, the Federal Trade Commission sued the executives of the long-defunct MoviePass app over allegations that they had fraudulently blocked customers from using the service as advertised, while failing to protect their data privacy. The FTC also announced that it had reached a settlement with MoviePass and its executives following the investigation.

Under the proposed settlement, MoviePass, parent company Helios and Matheson Analytics, CEO Mitch Lowe and chairman Ted Farnsworth are prohibited from falsely presenting their business and data security practices to customers. All companies controlled by these entities are also required to deploy comprehensive information security programs to protect consumers.

“MoviePass and its executives have gone to great lengths to deny consumers access to the service they paid for, while also failing to secure their personal information,” said Daniel Kaufman, FTC’s acting director of the Bureau of Consumer Protection, in a statement Monday. “The FTC will continue to work to protect consumers from being misled and to ensure that companies keep their promises.”

Last year, MoviesPass was declared bankrupt after a tumultuous two years of trying to disrupt the cinema business. The company offered users one movie ticket a day for every movie in every theater for less than $10 a month. The edge reported in 2019 that MoviePass would purchase tickets at box office prices and then give them to consumers for the small monthly fee, ultimately driving the company out of business.

Throughout its existence, MoviePass was briefly discontinued, subscription costs increased, and the number of movies users could watch per month became more limited.

The FTC’s complaint accuses the company of deceptively marketing its “one movie a day” service to subscribers and prohibiting customers from using the service as advertised. The company also alleges that the company falsely invalidated customers’ passwords due to “suspicious activity or potential fraud” in order to ban frequent moviegoers from the service. The FTC also says MoviePass has launched a ticket verification program to discourage people from using the service.

As part of the settlement, MoviePass operators must implement comprehensive data security programs in future enterprises after storing MoviePass customer data in plain text, the FTC said.

Since MoviePass went bankrupt before the FTC took action, the agency plans to open a file for public comment on the proposed order, FTC Commissioner Rohit Chopra said in a tweet Monday.