Netflix reveals $9m payout in privacy legal action

Netflix recently launched its on-demand streaming service in the UK

Netflix has paid $9m (£5.7m) dollars to settle a privacy-related legal action, a financial filing has revealed.

The online streaming firm, which made no admission of wrongdoing, said the settlement related to compliance with the Video Protection Privacy Act.

The 1988 US legislation prohibits the disclosure of video rental histories.

It is reported that the legal action concerned allegations that Netflix was failing to delete the viewing histories of customers who had left the service.

The settlement put a significant dent in Netflix's finances - after accounting for the payment fourth-quarter earnings fell from $40.7m (£25.8m) to $35.2m (£22.3m).

The Video Protection Privacy Act (VPPA) was passed after a newspaper disclosed the viewing records of then US Supreme Court nominee Robert Bork.

The viewing habits revealed were innocuous, but the fact of their release generated sufficient concern to result in the passage of the VPPA.

As well as preventing disclosure of the rental history,according the Electronic Privacy Information Centerthe act requires that "video stores destroy rental records no longer than one year after an account is terminated".

TheAssociated Press reports the settled legal action claimedNetflix kept records of what subscribers watched for up to two years after they had cancelled their accounts.

Contested Act

Netflix has in the past argued against parts of the 24-year-old VPPA, which it maintains prevents it offering a Netflix Facebook app in the US.

The app, which is available in 46 other countries, would allow US-based users to share information on what they are watching with Facebook friends.

But the company has said that this aspect of the law was not an issue in the settlement.

In a statement it said: "This matter is unrelated to the company's concerns about the ambiguities contained in the VPPA."

Netflix has not yet responded to a BBC request for comment.