For installing software on smart TVs and collecting viewing data on 11 million consumers without their knowledge or consent, Vizio, Inc. will pay the Federal Trade Commission and the New Jersey Attorney General $2.2 million and change its practices.

According to the regulators, beginning in February 2014, Vizio and an affiliated company manufactured smart TVs that captured second-by-second data about video displayed on the television including consumer cable, broadband, set-top box, DVD, over-the-air broadcasts, and streaming devices, with demographic information appended (such as sex, age, income, marital status, household status, household size, educational level, and household value).

Vizio—one of the largest manufacturers and sellers of Internet-connected "smart" televisions—then sold that information to third parties that used it for various purposes, including targeted advertising, the FTC and AG alleged. Although the company promoted its "Smart Interactivity" feature that "enables program offers and suggestions," Vizio never informed consumers of the collection or sale of their data, the regulators said.

To settle the charges of violating the Federal Trade Commission Act as well as New Jersey's consumer protection law, Vizio must prominently disclose and obtain affirmative express consent for its data collection and sharing. The consent order also requires the defendants to refrain from misrepresentations about privacy, security, or confidentiality of consumer information they collect.

In addition, Vizio must implement a comprehensive data privacy program (with biennial assessments), delete consumer data collected before March 1, 2016, and pay $1.5 million to the FTC and $1 million to the state of New Jersey, with $300,000 of the judgment suspended.

To read the complaint and stipulated order in FTC v. Vizio, Inc., click here.

Why it matters: Recently appointed Acting Chair of the FTC Maureen K. Ohlhausen filed a concurring statement in the action. Although she voted in favor of the stipulated order, she expressed concern about one of the allegations in the agency's complaint, that household or individual television viewing activity is sensitive information and that sharing the data without consent causes or is likely to cause a "substantial injury" under Section 5 of the FTC Act. While there may be good public policy reasons to consider such information sensitive, the statute requires the Commission to "determine whether the practice causes substantial injury that is not reasonably avoidable by the consumer and is not outweighed by benefits to competition or consumers," she said. The Vizio action "demonstrates the need for the FTC to examine more rigorously what constitutes 'substantial injury' in the context of information about consumers," Ohlhausen wrote. "In the coming weeks I will launch an effort to examine this important issue further."