What, Big Brother is going to be snooping in on private conversations now? How the heck are they going to catch someone using a friend's password and then having to prove it in a court of law? Nope, ain't gonna happen. Not that there's anything Hollyweird puts out that's worth watching.
If the law allows Netflix to track back on the IP address used, then they can spot suspicious usage. If the same login is used by multiple IP addresses, and the secondary addresses are not mobile hotspots, but home routers, they can shut down the account and refer it to law enforcement as theft. Without the law, they probably do not have the authority to trace the IP addresses.
This is the problem with any business model that offers unlimited usage for a fixed monthly charge, and that can be easily shared. It’s like going to an all-you-can-eat restaurant and trying to tell them the wife won’t eat, she’s just there to keep you company. At least with Netflix’s original DVD by mail service, the customer could only get three(?) DVDs at a time and then had to return them before ordering more. Tougher to share a neighbor’s account that way. Now, with their downloading service, it is much easier to share an account and not pay for it.