Antitrust Law Daily Wrap Up, PRIVACY—7th Cir.: Redbox’s disclosures to call center did not violate Video Privacy Protection Act, (Oct 24, 2014)

By Thomas Long, J.D.

Video rental service provider Redbox was insulated from consumer claims under the Video Privacy Protection Act (VPPA) because disclosures made by Redbox to a third-party customer service call center operator fell within a statutory exception for disclosures made in the ordinary course of business, the U.S. Court of Appeals in Chicago has held (Sterk v. Redbox Automated Retail, LLC, October 23, 2014, Flaum, J.). A district court’s grant of summary judgment in Redbox’s favor was affirmed.

Redbox operated automated self-service kiosks at which customers rented DVDs and Blu-ray discs with a debit or credit card for a daily rental fee. Although Redbox owned and operated the machines, the company outsourced certain "back office" functions to various service providers. Among these providers, Redbox engaged Stream Global Services to field Redbox customer inquiries through a customer service call center.

When customers needed service—for example, when they had technical difficulties with a Redbox kiosk—they could call Stream via a phone number listed on the machine. If resolution of the customer’s issue required accessing that customer’s video rental history—for instance, if a kiosk charged the customer’s credit card, but failed to dispense the selected movie—a call center representative (a Stream employee) was able to do so.

To allow Stream to perform Redbox’s customer service functions, Redbox granted Stream access to the database in which Redbox stores relevant customer information. Two consumers—Kevin Sterk and Jiah Chung—objected to Stream’s ability to access customer rental histories, as well as Stream’s use of customer records in the course of training its employees. The consumers filed suit against Redbox, asserting that its disclosure of customer information to Stream violated the VPPA, 18 U.S.C. §2710.

The VPPA generally prohibited "video tape service providers" like Redbox from disclosing personally identifiable information concerning customers. Personally identifiable information included information that identified a person as having requested or obtained specific video materials or services from a video tape service provider.

The VPPA provided for several exceptions from this broad prohibition. The statute allowed disclosure of a consumer’s video rental history when the consumer had provided written consent, when the party seeking disclosure had obtained a warrant or court order, or when the disclosure was incident to the video tape service provider’s ordinary course of business. According to the Seventh Circuit, the disclosures involved in this case fell under the third exception, for disclosures made incident to the provider’s "ordinary course of business."

The court rejected the plaintiffs’ argument that that the exception permitted only "request processing" that consisted of the processing of requests for specific video materials. The VPPA’s definition of "ordinary course of business" stated that the term meant "debt collection activities, order fulfillment, request processing, and the transfer of ownership." The statute further stated that personally identifiable information "includes information which identifies a person as having requested or obtained specific video materials or services from a video tape service provider." The inclusion of the phrase "or services" indicated that "request processing" covered more than just requests for specific video materials.

Moreover, common sense counseled against carving out customer service from Redbox’s "ordinary course of business," merely because it provided automated services rather than brick-and-mortar retail store services.

"[W]hen the VPPA was enacted, we can safely assume that Congress contemplated customer service as part and parcel of the ordinary rental experience," the court said. "That Redbox has replaced most live customer service interactions with a computer interface does not change this."

The case is No. 13-3037.

Attorneys: Ari J. Scharg (Edelson McGuire, LLC) for Kevin Sterk and Jiah Chung. Natalie Spears (Dentons) for Redbox Automated Retail, LLC.

Companies: Redbox Automated Retail, LLC

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