Legal

Media giant settles for $930k with FTC over allegations it lied about eavesdropping on conversations through smart devices

Cox Media Group allegedly sold a bogus AI-powered snoopfest service

It’s not every day a titan of industry pays six figures to settle claims it lied about spying on users via their smart home devices, but the FTC said that it would conclude the case against TV, radio, and advertising giant Cox Media Group (CMG) if it does.

It would also need to make certain commitments around making misrepresentations. CMG, together with two smaller marketing companies, New Hampshire-based MindSift LLC and 1010 Digital Works LLC in Wisconsin, is alleged to have misled customers in advertising a supposed AI-powered service.

This marketing product, called “Active Listening,” was pitched as a novel algorithm that could take snippets from user conversations, supposedly overheard by their smart home devices, and use them to generate targeted ads to other users in specific geographic regions.

The FTC alleged that these companies were, in essence, claiming to be selling data they said they'd gathered by spying on users, who were said to have given their consent to all of this.

In reality, claimed the watchdog, the trio was instead selling lists of email addresses bought from data brokers “at a significant markup,” the FTC said.

There had been no listening in on smart devices or conversations of any kind, there was no voice data being used at all, and consumers had not given their consent to the advertised service, the regulator went on to allege.

“Not only did the product these companies marketed not do what they claimed it did, but they also misled potential customers by claiming consumers had opted into this service when it’s clear they did not,” said Christopher Mufarrige, director at the FTC’s Bureau of Consumer Protection. 

“It is a basic rule of business that you need to be honest with your customers, and these companies failed to do that.”

According to the complaints leveled at the three companies, in saying that users had consented to be enrolled in its Active Listening service, what they actually meant was that users had agreed to the terms of service when downloading or using certain applications.

The FTC said that this is not the same as providing consent for their day-to-day conversations being snooped on by an algorithm running in their smart home devices.

Further, even if Active Listening did work as the trio described, it would have violated Section 5 of the FTC Act because of the companies’ flawed consent model.

CMG will pay the vast majority of the settlement sum, $880,000, while the two smaller companies will each pay $25,000. The funds will be used to compensate customers who bought into Active Listening’s marketing, the FTC said.

All three companies are also barred from misrepresenting the features of their marketing services, collecting voice data, and geographic targeting capabilities.

The Register contacted CMG for a response. ®