Lawsuit: Peloton Violated Customer Privacy by Selling Data to Train AI

Peloton, the once-booming exercise equipment company, is facing a lawsuit that claims it illegally sold customer data for use in training AI systems. The company is sweating its legal trouble as a California judge has denied its attempt to dismiss the lawsuit.

The Register reports that the fitness technology giant Peloton is facing a significant legal challenge after a California judge refused to dismiss a lawsuit accusing the company of violating state privacy laws. The case, filed in June 2022 in California federal court, alleges that Peloton allowed a third-party company, Drift, to intercept and record chat conversations between Peloton representatives and customers without obtaining proper consent.

At the heart of the lawsuit is the claim that Peloton’s use of Drift’s software violated the California Invasion of Privacy Act (CIPA). According to the complaint, web chats between Peloton and its customers were first routed through Drift’s systems, which then used these conversations to improve its own AI systems. The plaintiff argues that this practice constitutes a breach of privacy, as Peloton “did not obtain visitors’ consent to either the wiretapping or sharing of their private conversations.”

This recent denial marks Peloton’s second unsuccessful attempt to have the case dismissed. In March 2023, the judge dismissed the original complaint for failure to state a claim. However, the plaintiff’s lawyers filed an amended complaint with a narrower scope, focusing specifically on one violation of CIPA – “aiding and abetting” Drift’s alleged violations of the law.

The crux of the plaintiff’s argument is that Peloton aided and abetted Drift because the latter used the intercepted communications to enhance its own software-as-a-service and machine learning capabilities. Under CIPA, this usage classifies Drift as an eavesdropper rather than a party to the conversation, as the harvested content was not solely used for Peloton’s benefit.

It’s worth noting that Drift, while mentioned in the lawsuit, is not a party to the complaint. The company, which was acquired by sales software firm Salesloft in February 2023, has not responded to inquiries about the case.

This legal battle comes at a challenging time for Peloton. The company, which saw a meteoric rise during the 2020 coronavirus pandemic with its expensive, ultra-connected exercise bikes, has since faced a series of setbacks. Safety concerns arose when its treadmills were linked to numerous injuries and at least one child fatality. These issues, combined with changing market conditions, have led to a dramatic decline in Peloton’s stock value, plummeting from a late-2020 high of $162 to all-time lows just above $3.

The lawsuit against Peloton is seeking class-action status, potentially broadening its impact. While a claim for injunctive relief included in the amended complaint was withdrawn before the judge’s decision, the potential penalties for Peloton, if it loses the case, remain unclear beyond possible damages paid to class members.

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