Texas sues Netflix for alleged illegal data collection, causing a slight drop in stock price

Investing.com - Texas Attorney General Ken Paxton has filed a lawsuit against Netflix (NASDAQ:NFLX), accusing the streaming giant of illegally monitoring users and abusing children’s data. The complaint states that the company repositions itself as a “logging company” focused on data monetization, placing commercial interests above consumer privacy.

The Texas lawsuit alleges that Netflix collected大量敏感行为数据 through deceptive means without explicit consent from millions of Texas users. Following the news of the lawsuit, the company’s stock, headquartered in Los Gatos, fell 1.3% during Monday’s trading session.

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The complaint points out that Netflix has deliberately misled users for years, claiming that subscription fees would protect them from data collection practices by other major tech companies. However, Texas authorities believe that the platform actually employs carefully designed technical means to systematically track users’ viewing habits, device locations, and home network behaviors.

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According to the lawsuit, every user action is considered a detailed data point that can be processed and sold. Texas officials point out that while Netflix executives publicly criticize competitors for “playing both sides,” they secretly build this tracking system.

Attorney General Paxton specifically criticizes Netflix for data exploitation of minors through its “children’s-only pages.” These pages claim to be safe, independent spaces for children, but the lawsuit states that these pages are subjected to the same level of data tracking and logging as adult accounts.

Netflix is accused of hiding privacy controls on children’s pages while concealing the true scope of behavioral tracking from parents. Texas believes that Netflix, claiming to be “ad-free and suitable for children,” has created a false sense of security among parents.

The lawsuit details how Netflix leverages vast amounts of data quietly extracted from family users to transition into digital advertising. It states that the company has shared this data with commercial data brokers and advertising technology platforms like Google and Amazon.

It is reported that these collaborations enable advertisers to match their client lists with Netflix’s internal audience data. Texas officials argue that residents of Texas have never consented to their viewing identities being linked within the “hidden network” of the advertising industry.

Beyond data collection issues, the lawsuit also accuses Netflix of intentionally using “dark patterns” to design its interface as an addictive product. Autoplay features are cited as typical examples, used to suppress consumers’ autonomous choices and eliminate natural pause points.

Texas believes these designs are especially harmful to children whose self-control abilities are still developing. By keeping users glued to the screen, Netflix allegedly maximizes the collection of behavioral signals that can be used for its data recording business.

The Attorney General seeks to hold Netflix accountable under the Texas Deceptive Trade Practices Act (DTPA). The lawsuit demands fines of up to $10,000 per violation and requests a permanent injunction to stop unauthorized data collection.

“Netflix has built a surveillance system aimed at illegally collecting personal data from Texas residents without their consent and profiting from it. My office will do everything possible to stop this,” said Attorney General Paxton. “Netflix is not the ad-free, child-friendly platform it claims to be.”

Specific demands include: requiring Netflix to default to turning off autoplay on children’s pages and deleting all data collected through deceptive means. Texas also requests a ban on sharing data with third-party data brokers without explicit user consent.

In response to privacy allegations, Netflix has traditionally characterized data collection as an essential part of the modern consumer experience. In past controversies, the company has maintained that logging user behavior is not surveillance but a necessary technical measure to maintain the stability of global streaming infrastructure and provide highly personalized recommendations.

Beyond operational justifications, Netflix frequently seeks to weaken privacy lawsuits through lobbying and legal challenges. In the 2011 controversy over the Video Privacy Protection Act (VPPA), Netflix argued that this Reagan-era law hindered innovation in the social media age. This effort ultimately led to amendments in 2013 that simplified the process for companies to obtain long-term “bundled” data sharing authorizations from users.

This article was translated with the assistance of artificial intelligence. For more information, see our Terms of Use.