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The SEC has confirmed that public companies can use social media outlets like Facebook and Twitter to disseminate material information, provided that investors are alerted in advance that information will be disclosed in this fashion.

This guidance came in a Report of Investigation under Section 21(a) of the Securities and Exchange Act of 1934, issued on April 2, 2013.  The underlying investigation concerned Netflix, Inc., and its CEO Reed Hastings.  Last July, Hastings announced on his personal Facebook page that June 2012 marked the first month that Netflix had streamed more than one billion hours of content.  No press release or Current Report on Form 8-K accompanied the Facebook post.  Despite prior announcements that it was nearing a billion hours of monthly streamed content and the fact that its revenue model is subscription-based, the price of Netflix common stock increased 16% over the next trading day.

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Continue Reading SEC Approves Use of Social Media to Communicate With Investors, But Warns Companies to Proceed With Caution

The past few years have witnessed a series of attempts by plaintiffs to apply the Video Privacy Protection Act (“VPPA”) — a statute passed in 1988 to protect against certain disclosures of video rental records — to the video distribution technologies of today.  For example, in Sterk v. Redbox Automated Retail, plaintiffs sued the video kiosk operator for violating the VPPA’s prohibitions against disclosure of video rental data and prolonged retention of such data.  (The Seventh Circuit threw out the retention claim after an interlocutory appeal of the district court ruling, but the disclosure claim is still pending.) 

Mollett v. Netflix, a suit filed under the VPPA (and an analogous California statute, Cal. Civ. Code. § 1799.3) involved yet another attempt at applying the statute in a way that its drafters could not have envisioned.  Noting this and several other infirmities in the complaint, Judge Davila of the Northern District of California dismissed the suit earlier this week. …

Continue Reading Court Dismisses VPPA Suit Against Netflix