Peloton is set to face court in California over allegations of unauthorized user chat data processing. The fitness company, which has tried twice to have the lawsuit dismissed, is accused of permitting third-party firm Drift to engage with user data without permission.
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In June 2023, Consumer Advocates, a legal firm, issued a class-action lawsuit against Peloton. In the lawsuit, it has been alleged that the conversations between the users of the app and the company’s support team were conducted through the Drift system, which is an AI marketing firm, and this was done without the permission of the users. Both Peloton and Drift are said to have violated the California Invasion of Privacy Act (CIPA), but the lawsuit is only against Peloton.
Drift’s AI marketing practices come under scrutiny
On its website, Peloton has a live chat feature that customers can use to make inquiries. The complaint claims that users did not know that Drift was recording and analyzing their chat content. Apart from chat transcripts, Drift’s system captured website visitors’ IP addresses, device types, and other information. This was allegedly utilized in the training of Drift’s AI systems, which consist of AI Chatbots.
Despite Peloton’s attempts to get the case thrown out, the court has allowed it to go forward, albeit with some restrictions. The issue of the moment is whether or not Peloton sought the affected users’ permission before conveying their information to Drift. Although Peloton is allowed to go through the chat content as it is a part of the conversation, the real problem is the passing of this information to Drift.
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Drift, which was bought by Salesloft in February, focuses on conversational AI for customer service and marketing. The company’s objective is to provide individualized content to consumers in real-time. However, the case against Peloton highlights the remains of trust and transparency in AI data gathering.
In its 2022 report, Drift identified trust and perception as two key factors that will be critical for the future of AI. The company recommended that clients avoid over-dependency on third-party cookies and focus on the need to build first-party data strategies.
Legal battle adds to Peloton’s recent challenges
The court will now ascertain if the Peloton customers had sufficient information on how to handle their data and whether they had the ability to decide on the same. Although Drift is not directly named in the lawsuit, the case has implications regarding data privacy and AI ethics.
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The legal battle comes at a challenging time for Peloton. The company has been struggling recently after experiencing a boost in sales during the pandemic lockdowns. Peloton’s stock value has dropped from $160 at the end of 2020 to the current $3.50.
The company was also fined $19 million last year for safety issues with its treadmills that caused injuries and the death of a child. In May, Barry McCarthy resigned as the CEO of the company following more layoffs, which was a blow to the company.
Cryptopolitan Reporting by Brenda Kanana