The operators of the defunct MoviePass Inc. reached a settlement Monday with Federal Trade Commission to resolve allegations that the company actively tried to block frequent users from using the service as advertised, according to a statement from the FTC.
MoviePass was a company that, starting in August 2017, offered a monthly subscription of $9.95, enabling subscribers to see one movie per day at most theaters in the country, paying theaters the full price every time a user saw a movie. The strategy led to deep losses as its customers saw movies much more frequently than expected.
Former executives from the company could not immediately be reached for comment.
The FTC said that the company and its leadership invalidated passwords of some users in an attempt to get its customers to use the service less, blaming the incident on “suspicious activity or potential fraud.” In addition, the company launched a ticket verification program that required subscribers to submit a picture of their physical ticket stub within a certain time frame in order to “discourage the use of the service.”
Meanwhile, the FTC said that MoviePass operators used “trip wires” for some customers who used the service more than three times per month. These policies contradicted MoviePass’ marketing campaign of “one movie per day.”
The FTC also said the the company did not take reasonable steps to secure personal information of users, like credit-card numbers and geolocations.
“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, in a Monday statement. “The FTC will continue working to protect consumers from deception and to ensure that businesses deliver on their promises.”