Investing.com -- Texas Attorney General Ken Paxton has filed a lawsuit against Netflix Inc (NASDAQ: NFLX), alleging the streaming giant illegally surveilled users and exploited children’s data. The legal action claims the company rebranded itself as a "logging company" that prioritizes data monetization over consumer privacy.

The state’s petition alleges that Netflix deceptively collected sensitive behavioral information without obtaining proper consent from its millions of Texas subscribers. Shares of the Los Gatos-based company ticked down 1.3% in Monday trading following the announcement of the litigation.

The lawsuit asserts that Netflix misrepresented its business model for years by claiming a subscription fee shielded users from the data-harvesting practices of other Big Tech firms. In reality, the state argues, the platform uses intentional engineering to track viewing habits, device locations, and household network interactions.

According to the filing, every user interaction is treated as a granular data point to be processed and eventually sold. The state contends that this tracking infrastructure was built while executives publicly derided competitors for "serving two masters."

Attorney General Paxton specifically highlighted the alleged exploitation of minors through "kids profiles" that were marketed as safe, segregated spaces. The petition claims these profiles were subjected to the same aggressive telemetry and logging apparatus used for adult accounts.

Netflix is accused of withholding privacy controls from these profiles while misleading parents about the extent of behavioral tracking. The state argues that parents were lulled into a false sense of security by assurances that the platform was "ad-free and kid-friendly."

The lawsuit details how Netflix allegedly pivoted into digital advertising by leveraging mountains of data quietly extracted from families. It claims the company now shares this information with commercial data brokers and advertising technology platforms like Google and Amazon.

These partnerships reportedly allow advertisers to match their own customer lists against Netflix’s internal audience data. The state argues that Texans never agreed to have their viewing identities stitched together across the "shadowy networks" of the advertising industry.

Beyond data collection, the filing alleges that Netflix intentionally designed its interface to be addictive through the use of "dark patterns." Features such as autoplay are cited as tools used to override consumer agency and eliminate natural breaking points.

The state contends that these design choices are particularly harmful to children, whose impulse control is still developing. By keeping users glued to the screen, Netflix allegedly maximizes the volume of behavioral signals it can harvest for its logging operations.

The Attorney General is seeking to hold Netflix accountable under the Texas Deceptive Trade Practices Act (DTPA). The lawsuit pursues civil penalties of up to $10,000 per violation and seeks a permanent injunction to stop the unauthorized collection of data.

"Netflix has built a surveillance program designed to illegally collect and profit from Texans’ personal data without their consent, and my office will do everything in our power to stop it," said Attorney General Paxton. "Netflix is not the ad-free and kid-friendly platform it claims to be."

Specific demands include requiring Netflix to disable autoplay by default on kids' profiles and purging all deceptively collected data. The state also seeks to prevent future data sharing with third-party brokers without explicit, informed consumer consent.

Netflix has historically countered privacy allegations by framing data collection as an essential component of the modern consumer experience. In past disputes, the company has argued that "logging" user interactions is not a form of surveillance, but rather a technical necessity for maintaining a seamless global streaming infrastructure and delivering the highly personalized recommendations that users have come to expect.

Beyond operational justifications, the company has frequently employed aggressive lobbying and statutory challenges to weaken the legal basis of privacy claims. During its 2011 dispute over the Video Privacy Protection Act (VPPA), Netflix argued that the Reagan-era law hindered innovation in the social media age. This effort eventually helped lead to a 2013 amendment to the VPPA, which simplified the process for companies to obtain long-term, "blanket" consent from users for data sharing.