FTC Fines Teladoc’s BetterHelp Service $7.8 Million for Misusing Customer Mental Health Data

Online counseling therapy service BetterHelp reaped $1.02 billion in revenue last year. A portion of that came from the sale of certain customer data to third parties, including Facebook and Snapchat. The company, which is owned by Teladoc Health Inc. (NASDAQ: TDOC), had promised the Federal Trade Commission (FTC) that it would keep such data confidential. Teladoc acquired BetterHelp in 2015 for $17.2 million. (Click here for the most used passwords in America and how long they take to crack.)

On Thursday, the FTC fined BetterHelp $7.8 million for violating its promises and banned the company from using customer data for target advertising in the future.

According to the FTC, BetterHelp promised consumers that it would not disclose personal health data except for limited purposes related to the services the company provides.

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In its complaint, the FTC said the company broke these promises:

[F]rom 2018 to 2020, [BetterHelp] used these consumers’ email addresses and the fact that they had previously been in therapy to instruct Facebook to identify similar consumers and target them with advertisements for the Service, bringing in tens of thousands of new paying users, and millions of dollars in revenue, as a result.

BetterHelp’s contribution to Teladoc’s 2022 revenue was $1.02 billion of the company’s total of $2.41 billion. BetterHelp’s full-year revenue rose by 41% year over year, nearly seven times faster than revenue growth in Teladoc’s Integrated Care segment.

Teladoc reported user growth of 7% to 83.3 million in its Integrated Care unit and member growth of 37% in its BetterHelp segment to 419,000. At a conference in January, Teladoc CEO Jason Gorevic said that BetterHelp provided therapy services to more than a million people last year and had more than 50 million interactions between patients and therapists.

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According to its most recent financial filing, Teladoc spent $623.5 million on advertising and marketing last year and, but for a noncash goodwill impairment of $13.4 billion, would have posted a profit of around $2 billion instead of a net loss of $13.66 billion.

At that same January conference, Gorevic addressed the cost of acquiring new customers for BetterHelp. He blamed the difficulty on “venture-backed behavioral health startups making ‘economically irrational decisions’ in regards to advertising spend.” In other words, trying to steal his company’s customers.

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The FTC’s complaint goes into substantial detail about BetterHelp’s disclosures of consumer health information for advertising purposes, beginning before the company was acquired by Teladoc:

Since 2013, [BetterHelp] has repeatedly broken each of its aforementioned privacy promises, using Visitors’and Users’ email addresses, IP addresses, enrollment in the Service, and certain Intake Questionnaire responses for various advertising purposes, including (1) retargeting Visitors with advertisements for the Service; (2) using Users’ health information to find and target potential new Users with advertisements—on the basis that these potential new Users were likely to sign up for the Service because they shared traits with current Users; and (3) optimizing Respondent’s advertisements, which involved targeting advertisements at individuals with attributes similar to those that had previously responded to Respondent’s ads, such as new Users.

A fine of $7.8 million seems like a small price to pay. Teladoc stock traded down about 2.9% in the noon hour on Thursday.