U.S. Federal Trade Commission (FTC) Issues

In its second annual review, the European Commission notes that the Privacy Shield scheme provides adequate protection for personal data but improvements are still in order.

Highlights include:

  • Since the first annual review, the Department of Commerce (DOC) referred more than 50 cases to the Federal Trade Commission (FTC), to take enforcement action where necessary.
  • New tools have been adopted to ensure compliance with Privacy Shield Principles including: spot checks, monitoring public reports about Privacy Shield participants, quarterly checks of companies flagged as potentially making false claims and issuing subpoenas to request information from participants.
  • The US is to appoint a Privacy Shield Ombudsperson by not later than February 28, 2019 or the Commission will consider taking steps under GDPR.
  • The Commission is monitoring the following areas to determine if sufficient progress has been made: (i) effectiveness of DOC enforcement mechanisms; (ii) progress of FTC sweeps; and (iii) appointment and effectiveness of complaints handling by the Ombudsperson.

Read the full report

Acting Federal Trade Commission (FTC) Chairman Maureen K. Ohlhausen made it clear that she expects the FTC’s enforcement role in protecting privacy and security to encompass automated and connected vehicles. In her opening remarks at a June 28, 2017 workshop hosted by the FTC and National Highway Traffic Safety Administration (NHTSA), she said the FTC will take action against manufacturers and service providers of autonomous and connected vehicles if their activities violate Section 5 of the FTC Act, which prohibits unfair and deceptive acts or practices.

Such concern is warranted as new technologies allow vehicles to not only access the Internet, but also to independently generate, store and transmit all types of data – some of which could be very valuable to law enforcement, insurance companies, and other industries. For example, such data can not only show a car’s precise location, but also whether it violated posted speed limits, and aggressively followed behind, or cut-off, other cars.

Acting Chairman Ohlhausen noted that the FTC wants to coordinate its regulatory efforts with NHTSA, and envisions that both organizations will have important roles, similar to the way the FTC and the Department of Health and Human Services both have roles with respect to the Health Insurance Portability and Accountability Act (HIPAA).

Traditionally, NHTSA has dealt with vehicle safety issues, as opposed to privacy and data security. Thus, it may mean that the FTC will have a key role on these issues as they apply to connected cars, as it already has been a major player on privacy and data security in other industries.

Acting Chairman Ohlhausen also encouraged Congress to consider data breach and data security legislation for these new industries, but speakers at the workshop (video available here and embedded below) noted that legislation in this area will have difficulty keeping up with the fast pace of change of these technologies.

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Specific federal legislation, or even laws at the state level, may be slow in coming given the many stakeholders who have an interest in the outcome. Until then, the broad mandate of Section 5 may be one of the main sources of enforcement. Companies who provide goods or services related to autonomous and connected vehicles should be familiar with the basic FTC security advice we have already blogged about here, and should work with knowledgeable attorneys as they pursue their design and manufacture plans.

In an effort to standardize data breach laws nationwide, Rep. Marsha Blackburn (R-Tenn) introduced H.R. 1770 to the House and Energy Commerce Committee this past week. Called the Data Security and Breach Notification Act, it aims to replace all state data breach laws with one federalized standard. Currently, 47 states and the District of Columbia have separate and distinct data breach laws. Rep. Blackburn’s legislation intends to make it easier for U.S. companies to adhere to data breach requirements by creating uniformity.

U.S. Capitol Building, Washington, D.C.If passed, H.R. 1770 would require any company that “acquires, maintains, stores, sells or otherwise uses data in electronic form that includes personal information”[i] to “implement and maintain reasonable security measures and practices to protect and secure personal information.”[ii] While companies with security breaches must have notification requirements, such notifications can be evaded if there is “no reasonable risk that the breach of security has resulted in, or will result in, identity theft, economic loss or economic harm, or financial fraud to the individuals whose personal information was affected by the breach of security.”[iii] However, in cases where more than 10,000 individuals’ personal information is “accessed or acquired by an unauthorized person,” the breached company would be required to inform both the Federal Bureau of Investigations and/or the Secret Service.[iv] If enacted, the legislation would give enforcement powers to state Attorneys General and the Federal Trade Commission.[v]

Following its approval by the House Energy and Commerce Committee on April 15, H.R. 1770 is expected to potentially see the floor under the guidance of Chairman Fred Upton (R-Mich) sometime the week of April 20.


References
[i] Data Security and Breach Notification Act of 2015, H.R. 1770, 114th Cong. § 5(5) (2015).
[ii] H.R. 1770 at § 2.
[iii] H.R. 1770 at § 3(a)(3).
[iv] H.R. 1770 at § 3(a)(5).
[v] H.R. 1770 at §4(a)-(b).

Officials from both the Federal Trade Commission (FTC) and European Union (EU) recently called for enhancements to the Obama administration’s proposed Consumer Privacy Bill of Rights.

The White House’s proposed Consumer Privacy Bill of Rights seeks to provide “a baseline of clear protections for consumers and greater certainty for companies.”  The guiding principles of the draft bill are:  individual control, transparency, respect for context, security, access and accuracy, focused collection and accountability.

But the proposed legislation also seeks to afford companies discretion and flexibility to promote innovation, which some officials argue has led to a lack of clarity.

FTC Chairwoman Edith Ramirez had hoped for a “stronger” proposal and had “concerns about the lack of clarity in the requirements that are set forth.”  However, Chairwoman Ramirez acknowledged the significance of a privacy bill backed by the White House.  FTC Commissioner Julie Brill also expressed concern over weaknesses in the draft, calling for more boundaries.

Likewise, European Data Protection Supervisor Giovanni Buttarelli felt that the proposal lacked clarity and that, as written, “a large majority of personal data would not be subject to any provisions or safeguards.”

To review the administration’s proposed bill, click here.

 

On December 31, 2014, the Federal Trade Commission announced that it approved a final order settling charges against Snapchat.

In its complaint, the FTC charged Snapchat with deceiving consumers over the amount of personal data that it collected and the security measures in place to protect the data from disclosure and misuse.

The settlement order prohibits Snapchat from misrepresenting the extent to which a message is deleted after being viewed by the recipient and the extent to which Snapchat is capable of detecting or notifying the sender when a recipient has captured a screenshot or otherwise saved the message.  Snapchat is also prohibited from misrepresenting the steps taken to protect against misuse or unauthorized disclosure of information.

Finally, the company will be required to implement a “comprehensive privacy program” and obtain assessments of that program every two years from an independent privacy professional for the next 20 years.

In its press release, the FTC noted that its settlement with Snapchat is “part of the FTC’s ongoing effort to ensure that companies market their apps truthfully and keep their privacy promises to consumers.”  For more information from the FTC on marketing apps, click here.

The Federal Trade Commission recently announced that it settled charges against a health billing company and its former CEO that they misled consumers who had signed up for their online billing portal by failing to inform them that the company would seek detailed medical information from pharmacies, medical labs and insurance companies.

The Atlanta-based medical billing provider operated a website where consumers could pay their medical bills, but in 2012, the company developed a separate service, Patient Health Report, that would provide consumers with comprehensive online medical records.  In order to populate the medical records, the company altered its registration process for the billing portal to include permission for the company to contact healthcare providers to obtain the consumer’s medical information, such as prescriptions, procedures, medical diagnoses, lab tests and more.

The company obtained a consumer’s “consent” through four authorizations presented in small windows on the webpage that displayed only six lines of the extensive text at a time and could be accepted by clicking one box to agree to all four authorizations at once.  According to the complaint, consumers registering for the billing service would have reasonably believed that the authorizations related only to billing.

The settlement requires the company to destroy any information collected relating to the Patient Health Report service.

This case is a good reminder for companies in the healthcare industry looking to offer new online products involving consumer health information that care must always be taken to ensure that consumers understand what the product offers and what information will be collected.

 

This week the Federal Trade Commission (FTC) fined TRUSTe, a company that endorses the data privacy practices of businesses, for misrepresenting its certification programs to consumers. TRUSTe offers Certified Privacy Seals, representing TRUSTe’s guarantee that e-commerce websites, mobile apps, cloud-based services, and child-centric websites are compliant with applicable regulatory mandates and employ best practices in protecting consumer information. To earn a Certified Privacy Seal, businesses must share their data privacy practices with TRUSTe, meet TRUSTe’s requirements for consumer transparency, and allow consumers to choose how personal information is collected and used.

However, once TRUSTe bestowed a Certified Privacy Seal on some companies, the FTC alleges that TRUSTe did little to ensure that these companies continued to follow TRUSTe’s best practices. TRUSTe admitted that it failed to conduct annual audits of previously certified websites, but reiterated that less than 10% of TRUSTe’s certifications were part of this oversight. You can read TRUSTe’s statement on its blog.

So, if you’re a business that deals with consumer personal information, is it worth the time and expense to receive third party certifications like those given by TRUSTe? It depends. Third party oversight may be valuable reassurance for your business, instilling confidence that all best practices and regulatory frameworks are identified and followed. However, don’t rely too heavily on such third party certification. While the FTC was silent on any ramifications for customers of TRUSTe, businesses should engage any third party certification with the mindset that the business itself is ultimately responsible for ensuring its privacy practices follow industry standards and meet all regulatory requirements.

 

Imagine you have completed your HIPAA risk assessment and implemented a robust privacy and security plan designed to meet each criteria of the Omnibus Rule. You think that, should you suffer a data breach involving protected health information as defined under HIPAA (PHI), you can show the Secretary of the Department of Health and Human Services (HHS) and its Office of Civil Rights (OCR), as well as media reporters and others, that you exercised due diligence and should not be penalized. Your expenditure of time and money will help ensure your compliance with federal law.

Unfortunately, however, HHS is not the only sheriff in town when it comes to data breach enforcement. In a formal administrative action, as well as two separate federal court actions, the Federal Trade Commission (FTC) has been battling LabMD for the past few years in a case that gets more interesting as the filings and rulings mount (In the Matter of LabMD, Inc., Docket No. 9357 before the FTC). LabMD’s CEO Michael Daugherty recently published a book on the dispute with a title analogizing the FTC to the devil, with the byline, “The Shocking Expose of the U.S. Government’s Surveillance and Overreach into Cybersecurity, Medicine, and Small Business.” Daugherty issued a press release in late January attributing the shutdown of operations of LabMD primarily to the FTC’s actions.

Among many other reasons, this case is interesting because of the dual jurisdiction of the FTC and HHS/OCR over breaches that involve individual health information.

On one hand, the HIPAA regulations detail a specific, fact-oriented process for determining whether an impermissible disclosure of PHI constitutes a breach under the law. The pre-Omnibus Rule breach analysis involved consideration of whether the impermissible disclosure posed a “significant risk of financial, reputational, or other harm” to the individual whose PHI was disclosed. The post-Omnibus Rule breach analysis presumes that an impermissible disclosure is a breach, unless a risk assessment that includes consideration of at least four specific factors demonstrates there was a “low probability” that the individual’s PHI was compromised.

In stark contrast to HIPAA, the FTC files enforcement actions based upon its decision that an entity’s data security practices are “unfair”, but it has not promulgated regulations or issued specific guidance as to how or when a determination of “unfairness” is made. Instead, the FTC routinely alleges that entities’ data security practices are “unfair” because they are not “reasonable” – two vague words that leave entities guessing about how to become FTC compliant.

In 2013, in an administrative action, LabMD challenged the FTC’s authority to institute these type of enforcement actions. LabMD argued, in part, that the FTC does not have the authoritiy to bring actions under the “unfairness” prong of Section 5 of the FTC Act. LabMD further argued that there should only be one sheriff in town – not both HHS and the FTC. Not surprisingly, in January 2014, the FTC denied the motion to dismiss, finding that HIPAA requirements are “largely consistent with the data security duties” of the FTC under the FTC Act.The opinion speaks of “data security duties” and “requirements” of the FTC Act, but these “duties” and “requirements” are not spelled out (much less even mentioned) in the FTC Act. As a result, how can anyone arrive at the determination that the standards are consistent? Instead, entities that suffer a data security incident must comply with the detailed analysis under HIPAA, as well as the absence of any clear guidance under the FTC Act.

In a March10, 2014 ruling, the administrative law judge ruled that he would permit LabMD to depose an FTC designee regarding consumers harmed by LabMD’s allegedly inadequate security practices. However, the judge also ruled that LabMD could not “inquire into why, or how, the factual bases of the allegations … justify the conclusion that [LabMD] violated the FTC Act.” So while the LabMD case may eventually provide some guidance as to the factual circumstances involved in an FTC determination that data security practices are “unfair” and have caused, or are likely to cause, consumer harm, the legal reasoning behind the FTC’s determinations is likely to remain a mystery.

In addition to the challenges mounted by LabMD, Wyndham Worldwide Corp., has also spent the past year contesting the FTC’s authority to pursue enforcement actions based upon companies’ alleged “unfair” or “unreasonable” data security practices. On Monday, April 7, 2014, the United States District Court for the District of New Jersey sided with the FTC and denied Wyndham’s motion to dismiss the FTC’s complaint. The Court found that Section 5 of the FTC Act permits the FTC to regulate data security, and that the FTC is not required to issue formal rules about what companies must do to implement “reasonable” data security practices.

These recent victories may cause the “other sheriff” – the FTC – to ramp up its efforts to regulate data security practices. Unfortunately, because it does not appear that the FTC will issue any guidance in the near future about what companies can do to ensure that their data security practices are reasonable, these companies must monitor closely the FTC’s actions, adjudications or other signals in an attempt to predict what the FTC views as data security best practices.

On Friday, February 22, 2013, the FTC resolved an enforcement action that it brought against HTC America Inc. for allegedly failing to use "reasonable and appropriate" security measures in developing and customizing its devices. In its first case against a mobile device manufacturer, the FTC has instructed HTC America Inc. about how to develop and build its products. The settlement between the FTC and HTC serves as yet another example where, in the absence of federal or state legislation, the FTC has stepped in and created data security standards. Essentially, the FTC continues to informally create legislation through settlements of its enforcement actions.  A copy of the consent order settling this action is attached here: ftc.gov/os/caselist/1223049/130222htcorder.pdf

The Federal Trade Commission announced yesterday a settlement with Epic Marketplace, an online advertising network, which prohibits Epic from further collection of data obtained by “browser sniffing” the surfing history of Internet users and requires Epic to destroy all previously collected data.

According to the FTC complaint, Epic was collecting information from millions of individuals by “browser sniffing,” which is a practice that allowed Epic to determine whether the user had previously visited more than 54,000 websites, including websites relating to fertility issues, impotence, menopause, incontinence, disability insurance, credit repair, debt relief, and personal bankruptcy. Once Epic had this information, it would then send targeted advertisements to the user.

Many users have no idea that this technology even exists, and the FTC’s main gripe appears to be that the user did not have knowledge this was occurring on sites outside of Epic’s advertising network. Epic’s privacy policy promised that Epic would collect information about users only for use in Epic’s 45,000 website network. Apparently, the FTC was not concerned with the practice but it’s concern was centered around Epic collecting information from users about visits to websites not in Epic’s website network.

“Consumers searching the Internet shouldn’t have to worry about whether someone is going to go sniffing through the sensitive, personal details of their browsing history without their knowledge,” FTC Chairman Jon Leibowitz said in a statement. “This type of unscrupulous behavior undermines consumers’ confidence, and we won’t tolerate it.”

Stated another way, the FTC is saying that Epic could collect information about whether consumers visited sites in its advertising network having to do with fertility issues, impotence, menopause, incontinence, disability insurance, credit repair, debt relief, and personal bankruptcy, and then use that information to serve that consumer advertisements. The problem was that Epic went beyond its own advertising network. That makes sense.  A company breaching the representations in its own privacy policy is low hanging fruit.

What the FTC is NOT saying is that consumers would never know what the heck Epic’s privacy policy says, so how could they consent to this collection and use of their information. Online advertisers are in this wonderful position where the consumer never really “gets” to them, the consumer only sees the advertisements that are served. .

So is the take away that any company besides Epic can use “browser sniffing” as long as its use is disclosed in its privacy policy (which consumers would not even know existed) and followed by that company?  The FTC is certainly not taking a contrary position.

The FTC press release follows:

Continue Reading FTC “History Sniffing” Settlement Meaningless or the Start of Something Bigger