(Bloomberg) -- Teladoc Health Inc.’s online mental health unit will be banned from sharing health information with Facebook parent Meta Platforms Inc. and other social media companies under a proposed settlement with US trade regulators.

BetterHelp, Teladoc’s online therapy business, will be barred from sharing data, including about mental health, for advertising purposes, the Federal Trade Commission said Thursday in a statement, alleging that the company violated privacy pledges for years. The company will also pay $7.8 million to resolve allegations that it revealed sensitive data to companies including Facebook and Snap Inc.’s Snapchat.

Online therapy companies that boomed during the Covid-19 pandemic have come under increasing scrutiny from regulators over marketing and prescribing practices. BetterHelp shared data from health questionnaires, along with email addresses and IP addresses, with internet companies for advertising, the FTC said.

BetterHelp said its use of “limited, encrypted information” for targeting ads was an “industry-standard practice” for health-care companies. The company admitted no wrongdoing and it doesn’t share “names or clinical data from therapy sessions” with advertisers, according to a statement.

The shares fell 2.3% at 2:15 p.m. in New York.

Privacy Assurances

BetterHelp’s intake questionnaires asked people about their mental and emotional states as well as medications, providing assurances regarding how the data would be kept private, the FTC complaint alleges. The complaint described instances where BetterHelp shared user details with Facebook and other companies for ad targeting. 

For example, between 2018 and 2020, the company told Facebook about 1.5 million people’s previous history of therapy, gathered from the surveys, to “re-target the visitors with advertisements and optimize” BetterHelp’s own ads, according to the complaint. The company also used data disclosed by users about their LGBTQ identities for advertising, the FTC said.

After the news outlet Jezebel published an investigation into the practices in February 2020, BetterHelp gave “false responses” to outraged users, the FTC alleged, including assurances that it wouldn’t pass any health and personal information to third parties.

Ark Stake

The proposed settlement will curtail how BetterHelp can use people’s information, require more comprehensive privacy programs, and order third parties to delete health data revealed by BetterHelp, the FTC said.

The digital health provider, which counts Cathie Wood’s ARK Investment Management LLC as its largest shareholder, received a civil investigative demand from the FTC on July 30, 2020, according to a securities filing Wednesday. Ark and its subsidiaries hold about 11.6% of the shares, according to data compiled by Bloomberg. A representative for Ark declined to comment. 

The inquiry wasn’t referenced in Teladoc’s other filings for the previous two years, though it has made more general disclosures around FTC scrutiny of digital marketing. A Teladoc representative didn’t respond to questions about why the investigation wasn’t disclosed earlier.

Teladoc had revenue of $2.4 billion last year, with about $1 billion coming from the BetterHelp. The segment had 420,000 paying users at the end of last year, according to a company filing.

--With assistance from Leah Nylen.

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