MoviePass settles with FTC over fraud and data security failures

On Monday, the Federal Trade Commission charged the executives of the long-defunct MoviePass app over allegations that they 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 as a result of the investigation.

Under the proposed settlement, MoviePass, its parent company Helios and Matheson Analytics, its CEO Mitch Lowe, and chairman Ted Farnsworth are forbidden from falsely representing their business and data security practices to customers. Any businesses controlled by these entities are also required to roll out comprehensive information security programs to protect consumers.

“MoviePass and its executives went to great lengths to deny consumers access to the service they paid for while also failing to secure their personal information,” Daniel Kaufman, FTC acting director of the Bureau of Consumer Protection said in a statement Monday. “The FTC will continue working to protect consumers from deception and to ensure that businesses deliver on their promises.”

Last year, MoviesPass declared bankruptcy after a tumultuous two years attempting to disrupt the moviegoing business. The company offered users one movie ticket a day to any film at any theater for less than $10 a month. The Verge reported in 2019 that MoviePass would purchase tickets at box office prices and then give them to consumers for the tiny monthly fee, eventually launching the company into bankruptcy.

Throughout its existence, MoviePass was briefly shut down, subscription fees increased, and the number of movies users could see a month became more limited.

The FTC’s complaint accuses the company of deceptively marketing its “one movie per day” service to subscribers and barring customers from using the service as advertised. It also alleges that the company falsely invalidated customer passwords over “suspicious activity or potential fraud” in order to ban frequent moviegoers from the service. The FTC also says that MoviePass initiated a ticket verification program as a means of discouraging people from using the service.

As part of the settlement, MoviePass’ operators must put comprehensive data security programs into place in any future ventures after saving MoviePass customer data in plain text, the FTC said.

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