FTC Alleges that MoviePass Worked to Stop its Own Customers From Using the Service

It may be hard to even recall MoviePass at this point, given the more than a year we just spent unable to go see movies in theaters, but keep reading and it should all come rushing back to you. You remember MoviePass, right? The service that achieved widespread popularity and fame for its too-good-to-be-true offer of “all you can watch” movies in theaters for merely $9.95 per month? Perhaps you remember the constant reports that it couldn’t sustain that particular business model, or the company’s frantic insistences that sure it could. Ultimately, the detractors were proven right—the service shut down in 2019 after two fraught years in operation, declaring bankruptcy in early 2020 just months before the COVID-19 pandemic would descend on the world.

Now, however, there are more consequences on the way for the operators of MoviePass, who are settling with the Federal Trade Commission (FTC) on a variety of deceptive practices that prompted customer complaints while the service was still operational. In particular, MoviePass is settling on a variety of FTC allegations that it went out of its way while operating to make sure its own customers weren’t able to see movies and use the service. At the same time, the company also faced FTC allegations of failing to secure subscribers’ personal data. Under the proposed settlement, MoviePass and its parents company Helios and Matheson Analytics, “will be barred from misrepresenting their business and data security practices,” along with being required to “implement comprehensive information security programs.”

“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,” said Daniel Kaufman, the FTC’s Acting Director of the Bureau of Consumer Protection. “The FTC will continue working to protect consumers from deception and to ensure that businesses deliver on their promises.”

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The root of the FTC allegations stem from MoviePass’ marketing of its “one movie per day” plan, which cost merely $9.95. This plan was inherently unprofitable for MoviePass assuming customers made regular use of it, so the company was forced to come up with discouragements that could keep the number of users artificially low.

First, the FTC says MoviePass purposely invalidated the passwords of thousands of subscribers (including MoviePass’ heaviest users), saying that there had been “suspicious activity or potential fraud” on those accounts. A broken password reset system then prevented those customers from being able to successfully change their password. Shockingly, the FTC complaint also alleges that company leaders Mitchell Lowe and Theodore Farnsworth personally approved this scheme, “and even chose the number of consumers to be targeted,” saying that “both executives knew their scheme was deceptive and harmful to consumers.”

MoviePass also launched a “ticket verification program” in order to discourage use of the service, which required MoviePass users to take photos of their movie ticket stubs for verification through the MoviePass app. This system ultimately blocked thousands of subscribers from the service, again targeting heavy users who were less profitable to MoviePass.

Finally, MoviePass also allegedly used “trip wires” in their app, which specifically blocked certain users from continuing to use the service after they hit a threshold of unprofitability to MoviePass. In other words, the more often you used MoviePass, the more likely you were to be randomly locked out of your account or booted from the service.

The company even managed to fail to protect users’ personal data at the same time, with the FTC alleging they never took “reasonable steps” to secure information such as names, email addresses, birth dates, credit card numbers and geolocation information.

So the next time a deal comes along that looks too good to be true, you might want to consider the possibility that it is.