Peloton faces lawsuit over claims it pedaled past privacy

Chat widget allegedly fed data to third party, which used it to train AI without telling customers

Peloton is pedaling toward a court date after a California judge denied its bid to dismiss a lawsuit that alleges the pandemic darling violated the US state's privacy laws – by allowing a third party to intercept and record chat records between Peloton reps and customers without their consent.

The lawsuit, filed in California federal court in June last year, claimed that Peloton's use of software provided by a company called Drift violated the California Invasion of Privacy Act (CIPA) because web chats were first routed through Drift's systems, which ultimately used the chats for improving its own AI systems.

Peloton "did not obtain visitors' consent to either the wiretapping or sharing of their private conversations," the first amended complaint [PDF] in the case alleged. "As a result, Defendant and the third parties have violated the CIPA in numerous ways."

Peloton's failure [PDF] to get the case dismissed was its second attempt to quash the matter. The first, in March this year, came far closer to succeeding when the judge tossed the original complaint for failure to state a claim. This second attempt comes after lawyers for the plaintiff, who is seeking to turn their case into a class action, filed an amended complaint earlier this year.

The original complaint made a far broader set of claims. The amended one, which the judge's order on Friday allowed to proceed, has a significantly narrower scope focusing on one particular violation of CIPA – "aiding and abetting" Drift's other violations of the Act.

The plaintiff argued that Peloton aided and abetted Drift because the latter company used the intercepted communications to improve its own software-as-a-service and machine learning software. Under CIPA, that means Drift was acting as an eavesdropper and not party to the conversation because its use of the harvested content wasn't solely for Peloton's benefit.

A claim for injunctive relief included in the amended complaint (and contested by Peloton) was withdrawn ahead of the judge's decision. With that claim withdrawn, it's not clear how Peloton would be penalized if it loses the case, outside of damages paid to class members. We approached lawyers for both sides, but didn't hear back.

Drift, which is described as having violated CIPA in its own ways in the lawsuit, isn't a party to the complaint and it's not clear if the company is otherwise being sued in the matter. Drift, which was acquired by sales software firm Salesloft in February this year, didn't respond to questions.

Peloton's expensive and ultra-connected exercise bikes became a media sensation during the 2020 coronavirus pandemic, with sales and share prices skyrocketing thanks to the sudden influx of work(out)-at-home orders. 

The company's star has since fallen considerably, with its treadmills injuring a number of people and causing at least one child fatality. Other issues have also contributed to shares plummeting from a late-2020 high of $162 to all-time lows just above $3.

Peloton didn't respond to questions for this story. ®

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