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MoviePass Deceived Users So They’d Use It Less, F.T.C. Says

When an executive warned that the practice would catch the attention of federal regulators and state attorneys general, Mr. Lowe responded in writing “OK I get it,” suggesting the company try it with “2 percent of our highest volume users,” the F.T.C. said.

In a separate effort, the company required the 20 percent of subscribers who used the service most often, about 450,000 people, to submit photos of their physical movie tickets for approval through the app, telling them they had been “randomly selected” for the program, the F.T.C. said. Those who failed to properly submit the tickets more than once would have their accounts canceled, the F.T.C. said.

The automated verification system often did not work on common mobile operating systems, and the software failed to recognize many user-submitted photos, the F.T.C. said. The program blocked thousands of people from using the service, the F.T.C. said.

Mr. Lowe personally chose how many people would be required to submit photos, the F.T.C. said.

In a third effort described by the commission, the company created a “trip wire” by imposing a limit on how often certain users could use the service, but did not disclose the limit in its advertising or terms of use. The company grouped subscribers based on how often they used the service, then, once the group hit an unannounced limit, the people in the group would be unable to use the service, regulators said. The users often did not know they had been cut off until they arrived at the theater, expecting to use their subscriptions, they said.

The trip wire was typically set on users who went to more than three movies per month, the F.T.C. said. Mr. Lowe set the thresholds, it said.

In addition, a data breach in 2019, which was previously reported, exposed the personal and financial information, including credit card numbers, of more than 28,000 customers, the F.T.C. said.

After three million people signed up — many more than executives had expected — the company perpetually struggled to bring in enough cash to offset costs. In April 2018, the company disclosed to regulators that it had been losing about $20 million a month for several months. In July 2018, it borrowed $5 million after it said it could not pay its bills and experienced a service interruption, but the company insisted its service remained stable.

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