FTC Beat
Posts Tagged ‘Data security’
Jul 09
2015

State Attorneys General Tell Congress: “Back-Off Our Data Breach Authority”

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Every week, we learn about new data breaches affecting consumers across the country. Federal government workers and retirees recently received the unsettling news that a breach compromised their personal information, including social security numbers, job history, pay, race, and benefits. Amid a host of other public relations issues, the Trump organization recently discovered a potential data breach at its hotel chain. If you visited the Detroit Zoo recently, you may want to check your credit card statements, as the zoo’s third party vendor detected “malware” which allowed access to customers’ credit and debit card numbers. And, certainly, none of us can forget the enormous data breach at Target, and the associated data breach notifications and subsequent lawsuits.

For years, members of Congress have stressed the need for national data breach standards and data security requirements. Aside from mandates in particular laws, such as HIPAA, movement on data breach requirements had stalled in Congress. Years ago, however, the states picked up the slack, establishing data breach notification laws requiring notifications to consumers and, in many instances to attorneys general and consumer protection offices when certain defined “personal information” was breached. California led the pack, passing its law in 2003. Today, 47 states have laws requiring organizations to notify consumers when a data breach has compromised consumers’ personal information. Several states’ laws also mandate particular data security practices, including Massachusetts, which took the lead on establishing “standards for protection of personal information.”

Many businesses and their lobbying organizations have urged Congress to preempt state laws and establish a national standard. Most companies have employees or customers in multiple states. Thus, under current laws, organizations have to address a multitude of state requirements, including triggering events, types of personal information covered, how quickly the notification must be made, who gets notified, what information should be included in the notification, among others. State Attorneys General, on the other hand, assert that, irrespective of these inconveniences, their oversight of data breaches through the supervision of notifications and enforcement has played a critical role in consumer protection.

This week, the Attorneys General from the 47 states wrote to Congressional leaders, urging Congress to maintain states’ authority in any federal law, by requiring data breach notifications, and preserving the states’ enforcement authority.

The AGs’ key points are:

  • State AG offices have played critical roles in investigating and enforcing data security lapses for more than a decade.
  • States have been able to respond to constant changes in data security by passing “significant, innovative laws related to data security, identity theft, and privacy.” This includes addressing new categories of information, such as biometric data and login credentials for online accounts.
  • States are on the “front lines” of helping consumers deal with the fallout of data breaches and have the most experience in guiding consumers through the process of removing fraudulent charges and repairing their credit. By way of example, the Illinois AG helped nearly 40,000 Illinois residents remove more than $27 million in unauthorized charges from their accounts.
  • Forty states participate in the “Privacy Working” group, where state AGs coordinate to investigate data breaches affecting consumers across multiple states.
  • Consumers keep asking for more protection. Any preemption of state law “would make consumers less protected than they are right now.”
  • States are better equipped to “quickly adjust to the challenges presented by a data-driven economy.”
  • Adding enforcement and regulatory authority at the federal level could hamper the effectiveness of the state law. Some breaches will be too small to have priority at the federal level; however, these breaches may have a large impact at the state or regional level.

Interestingly, just this week, Rep. David Cicilline (D-RI) introduced a House bill mandating that companies inform consumers within 30 days of a data breach. The bill also requires minimum security standards. Representative Cicilline’s bill would not preempt stricter state-level data breach security laws. The bill also contains a broad definition of “personal information” to include data that could lead to “dignity harm” – such as personal photos and videos, in addition to the traditional categories of banking information and social security numbers. The proposed legislation would also impose civil penalties upon organizations that failed to meet the standards.

Without a doubt data breaches will continue – whether from bad actors, technical glitches, or common employee negligence. The states have certainly “picked up the slack” for over a decade while Congressional actions stalled. Understandably, the state AGs do not want Congress taking over the play in their large and established “privacy sandbox.” Preemption will continue to be a key issue for any federal data breach legislation before Congress. As someone who has guided companies through multi-state data breach notifications, I have seen firsthand that requiring businesses to deal with dozens of differing state requirements is costly and extremely burdensome. Small businesses, in particular, are faced with having to grapple with a data security incident while trying to understand and comply with a multitude of state requirements. Those businesses do not have the resources of a “Target” and complying with a patchwork of laws significantly and adversely impacts those businesses. While consumer protection is paramount, a federal standard for data breach notification would provide a common and clear-cut standard for all organizations and reduce regulatory burdens. While the federal standard could preempt state notification laws, states could continue to play critical roles as enforcement authorities.

In the interim, companies must ensure that they comply with the information security requirements and data breach notifications of applicable states. An important, and overlooked aspect is to remember that while an organization may think of itself as, say a “Vermont” or “Virginia” company, it is likely that the company has personal information on residents of various states – for instance, employees who telecommute from neighboring states, or employees who left the company and moved to a different state. Even a “local” or “regional” company can face a host of state requirements. As part of an organization’s data security planning, companies should periodically survey the personal information they hold and the affected states. In addition to data breach requirements in the event of a breach, organizations need to address applicable state data security standards.

Mar 06
2015

Why the FTC Can Go After Companies For Insufficient Data Security Allegations

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FTC seems more confident than ever in its authority to go after companies with insufficient data security measures. As of January 2015, FTC had settled 53 data-security enforcement actions, and FTC Senior Attorney Lesley Fair expects that number to increase.

Not everyone is sanguine about FTC’s enforcement efforts. Companies targeted for administrative action complain that the Commission is acting beyond its delegated powers under the Federal Trade Commission Act (the “FTCA”). So far, courts have declined to intervene in any administrative action that is not yet resolved at the agency level.

One such case involves LabMD, Inc., an Atlanta-based cancer-screening laboratory. At least nine years ago, someone downloaded onto the billing department manager’s computer a peer-to-peer file-sharing application called Limewire. Hundreds of files on the computer were designated for sharing on the network, including an insurance aging report that contained personal information for more than 9,000 LabMD customers. In 2008, a third party notified LabMD that the aging report was available on Limewire. The application was promptly removed from the billing department manager’s computer, but the damage allegedly had been done. According to FTC, authorities discovered in October 2012 that data from the aging report and other LabMD files were being used to commit identify theft against LabMD’s customers.

Ten months later, FTC filed an administrative complaint against LabMD alleging that it had failed to employ reasonable and appropriate data security measures. FTC further alleged that LabMD could have corrected the problems at relatively low cost with readily available security measures. By contrast, LabMD’s customers had no way of knowing about the failures and could not reasonably avoid the potential harms, such as identity theft, medical identity theft, and disclosure of sensitive, private, medical information. On these facts, FTC alleged that LabMD had committed an unfair trade practice in violation of the FTCA.

LabMD tried to get the administrative action dismissed on several grounds, including that the FTCA does not give the Commission express authority to regulate data-security practices. The Commission denied LabMD’s motion, explaining that Congress gave FTC broad jurisdiction to regulate unfair and deceptive practices that meet a three-factor test: section 5(n) provides that, in enforcement actions or rulemaking proceedings, the Commission has authority to determine that an act or practice is “unfair” if (i) it causes or is likely to cause substantial injury to consumers which is (ii) not reasonably avoidable by consumers themselves and (iii) not outweighed by countervailing benefits to consumers or competition. Commissioners noted that the FTCA as passed in 1918 granted FTC the authority to regulate unfair methods of competition. When courts took a narrow view of that authority, Congress responded by amending the FTCA to clarify that the Commission has authority to regulate unfair acts or practices that injure the public, regardless of whether they injure one’s competitors. According to the Commission, the statutory delegation is intentionally broad, giving FTC discretionary authority to define unfair practices on a flexible, incremental basis. For these and other reasons, the administrative action against LabMD would proceed.

Having failed to get the case dismissed, LabMD sought relief from the federal courts to no avail. On January 20, 2015, the U.S. Court of Appeals for the Eleventh Circuit dismissed LabMD’s suit for lack of subject-matter jurisdiction. The court explained that it lacked the power to decide LabMD’s claims in the absence of final agency action. FTC had filed a complaint and issued an order denying LabMD’s motion to dismiss. But neither was a reviewable agency action because neither represented a “consummation of the agency’s decision-making process.” Moreover, “no direct and appreciable legal consequences” flowed from the actions and “no rights or obligations had been determined” by them.

LabMD can challenge FTC’s data-security jurisdiction only after the Commission’s proceedings against it are final. That may well be too late. As a result of FTC’s enforcement action, the company was forced to wind down its operations more than a year ago.

LabMD is one of very few companies to test FTC’s data-security jurisdiction. In 2007, a federal court in Wyoming sided with FTC in holding that the defendant’s unauthorized disclosure of customer phone records was an unfair trade practice in violation of the FTCA. The Tenth Circuit affirmed that decision on appeal.

More recently, a district court in New Jersey gave FTC a preliminary victory against Wyndham Worldwide Corporation. In that case, the court held that FTC’s unfairness jurisdiction extends to data-security practices that meet the three-factor test under Section 5(n). That decision is currently on appeal before the Third Circuit. During oral argument on March 3rd, the three-judge panel signaled little doubt that FTC has authority to regulate unreasonable cybersecurity practices. Instead, the panel was concerned with how the Commission exercises that authority—specifically, whether and how it has given notice as to what data security measures are considered to be “unfair.”

posted in:
Cybersecurity
Sep 04
2014

Federal Trade Commission Checks Out Mobile Shopping Apps

Happy young Asian woman shopping.

In August, the Federal Trade Commission (“FTC”) released a staff report concerning mobile shopping applications (“apps”).  FTC staff reviewed some of the most popular apps consumers utilize to comparison shop, collect and redeem deals and discounts, and pay in-store with their mobile devices.  This new report focused on shopping apps offering price comparison, special deals, and mobile payments. The August report is available here.

Popularity of Mobile Shopping Apps/FTC Interest

Shoppers can empower themselves in the retail environment by comparison shopping via their smartphones in real-time.  According to a 2014 Report by the Board of Governors of the Federal Reserve System, 44% of smartphone owners report using their mobile phones to comparison shop while in retail store, and 68% of those consumers changed where they made a purchase as a result.  Consumers can also get instant coupons and deals to present at checkout.  With a wave of a phone at the checkout counter, consumers can then make purchases.

While the shopping apps have surged in popularity, the FTC staff is concerned about consumer protection, data security and privacy issues associated with the apps. The FTC studied what types of disclosures and practices control in the event of unauthorized transactions, billing errors, or other payment-related disputes.  The agency also examined the disclosures that apps provide to consumers concerning data privacy and security.

 Apps Lack Important Information

FTC staff concluded that many of the apps they reviewed failed to provide consumers with important pre-download information.  In particular, only a few of the in-store purchase apps gave consumers information describing how the app handled payment-related disputes and consumers’ liability for charges (including unauthorized charges).

FTC staff determined that fourteen out of thirty in-store purchase apps did not disclose whether they had any dispute resolution or liability limits policies prior to download.  And, out of sixteen apps that provided pre-download information about dispute resolution procedures or liability limits, only nine of those apps provided written protections for users.  Some apps disclaimed all liability for losses.

Data Security Information Vague

FTC staff focused particular attention on data privacy and security, because more than other technologies, mobile devices are personal to a user, always on, and frequently with the user. These features enable an app to collect a huge amount of information, such as location, interests, and affiliations, which could be shared broadly with third parties.  Staff noted that, “while almost all of the apps stated that they share personal data, 29 percent of price comparison apps, 17 percent of deal apps, and 33 percent of in-store purchase apps reserved the right to share users’ personal data without restriction.”

Staff concluded that while privacy disclosures are improving, they tend to be overly broad and confusing. In addition, app developers may not be considering whether they even have a business need for all the information they are collecting.  As to data security, staff noted it did not test the services to verify the security promises made.  However, FTC staff reminded companies that it has taken enforcement actions against mobile apps it believed to have failed to secure personal data (such as Snapchat and Credit Karma).  The report states, “Staff encourages vendors of shopping apps, and indeed vendors of all apps that collect consumer data, to secure the data they collect.  Further those apps must honor any representations about security that they make to consumers.”

FTC Staff Recommends Better Disclosures and Data Security Practices

The report urges companies to disclose to consumers their rights and liability limits for unauthorized, fraudulent, or erroneous transactions.  Organizations offering these shopping apps should also explain to consumers what protections they have based on their methods of payment and what options are available for resolving payment and billing disputes.  Companies should provide clear, detailed explanations for how they collect, use and share consumer data.  And, apps must put promises into practice by abiding by data security representations.

Consumer Responsibility Plays Role, Too

Importantly, the FTC staff report does not place the entire burden on companies offering the mobile apps. Rather, FTC staff urge consumers to be proactive when using these apps.  The staff report recommends that consumers look for and consider the dispute resolution and liability limits of the apps they download.  Consumers should also analyze what payment method to use when purchasing via these apps. If consumers cannot find sufficient information, they should consider an alternative app, or make only small purchases.

While a great “deal” could be available with a click on a smartphone, the FTC staff urges consumers to review available information on how their personal and financial data may be collected, used and shared while they get that deal.  If consumers are not satisfied with the information provided regarding data privacy and security, then staff recommends that they choose a different app, or limit the financial and personal financial data they provide.  (Though that last piece of advice may not be practical considering most shopping apps require a certain level of personal and financial information simply to complete a transaction).

Deal or No Deal?  FTC Will be Watching New Shopping Apps

               FTC Staff has concerns about mobile payments and will continue to focus on consumer protections.  The agency has taken several enforcement actions against companies for failing to secure personal and payment information and it does not appear to be slowing down.  While the FTC recognizes the benefits of these new shopping and payment technologies, it is also keenly aware of the enormous amount of data obtained by companies when consumers use these services. Thus, companies should anticipate that the FTC will continue to monitor shopping and deal apps with particular attention on disclosures and data practices.

Aug 04
2014

Google/Viacom Win Video Privacy Protection Act Case – Common Sense Finally Emerges

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In an important decision in a federal court case in New Jersey, In Re Nickelodeon Privacy Litigation, Google and Viacom obtained a dismissal of a claim against them under the Video Privacy Protection Act (“VPPA”).  The decision narrows the scope of who can be liable under the VPPA and what information is within the scope of the statute.

Congress passed the VPPA in 1988 after Robert Bork, a nominee for the U.S. Supreme Court, had his video rental history published during the nomination process.  While Judge Bork’s viewing habits were unremarkable, members of Congress became understandably concerned that any individual’s private viewing information could easily be made public.  The VPPA makes any “video tape service provider” that discloses rental information outside the ordinary course of business liable for $2,500 in damages per person, in addition to attorneys’ fees and punitive damages.  There is no cap on the damages that plaintiffs can be awarded under the statute and cases are typically brought as class actions with large groups of plaintiffs.

In 2013, Congress passed and President Obama signed the first major change to the VPPA since it was enacted, the Video Privacy Protection Act Amendments Act of 2012.  These amendments made it easier for companies to obtain consent from consumers to share their video viewing history.  The amendment removed the requirement that video service providers obtain written consent from users every time a user’s viewing choice is disclosed.  Additionally, the amendment allowed for a provider to obtain a user’s consent online and that the consent can apply on an ongoing basis for two years as long as the user is given the opportunity to withdraw that consent.  The amendments were enacted in response to the interest by consumers in sharing videos on social media platforms.

Viacom owns and operates three websites through which users can stream videos and play video games.  The plaintiffs in the lawsuit were registered users of those websites.  When a user registered with the site, that individual would be assigned a code name based on that user’s gender and age.  The plaintiffs alleged that the user code name would be combined with a code that identified which videos the user watched and that code was disclosed by Viacom to Google.  The plaintiffs sued Viacom and Google alleging among other things that this disclosure was a violation of the VPPA.

The VPPA claim against Google was dismissed because the court found that Google was not a “video tape service provider” (“VTSP”) as required for liability under the statute.  The court reasoned that Google is not “engaged in the business of renting, selling, or delivering either video tapes or similar audio materials.”  Some courts have shown a willingness to extend the definition of a VTSP to companies such as Hulu and Netflix that offer video-streaming services, but the court in this case stopped short of extending it to Google, a company that does not offer video services as its main business.

The VPPA claim against Viacom failed because the court found that, even if Viacom were a VTSP, an issue the court did not reach, Viacom did not release personally identifiable information to Google, which is required to have occurred under the VPPA.  The court concluded that “anonymous user IDs, a child’s gender and age, and information about the computer used to access Viacom’s websites” – even if disclosed by Viacom – were not personally identifiable information.

With its potential for large damages there has been a recent uptick in cases filed under the VPPA.  Recently, plaintiffs have filed cases against well-known media companies including Hulu, Netflix, ESPN, the Cartoon Network, and The Wall Street Journal. These cases have started to show a trend in shifting away from the intended defendants, companies whose main line of business is renting and selling videos, and toward companies that provide streaming video as part of their business.

The line drawn by the court in this case of who can be considered a VTSP could be a significant win for companies that offer mobile apps with streaming video capabilities by limiting the definition of a VTSP to companies that are in the business of renting or selling videos.  Such a limitation would be welcome by many operators of new technologies.  Given the vast number of devices and platforms that deliver video content of some kind, an expansion of the definition of a VTSP could lead to a flood of litigation involving companies that are not in the business of renting or selling videos and were not the intended defendants under the statute.

While this decision will not stop the recent uptick in VPPA litigation, it will provide courts with guidance as how to determine who should be liable under the VPPA.  The text of the VPPA was written in a way that did not anticipate the current environment where streaming video is available on a multitude of devices.  As more cases are filed, the limits of the statute’s scope will be tested.  However, this court’s decision provides precedent for a common sense approach to determining who should be held liable under the VPPA.

posted in:
Privacy
Jan 28
2014

Data Privacy Day

By Michelle Cohen, CIPP-US

On January 28th, in an effort raise awareness of privacy and data privacy, the United States, Canada and 27 countries of the European Union celebrate International Data Privacy Day.  Many organizations use Data Privacy Day as an opportunity to educate their employees and stakeholders about privacy-related topics.  With the recent, high-profile data breaches as Target, Neiman Marcus, and potentially, Michaels, the need for training and instruction on data security is more critical than ever before.  In this vein, we’ve set forth our views on what we see as the year ahead in legal developments relating to data security and what companies can do to prepare.

Legislation Introduced but on the Move?

Data security and data breaches will continue to be the focus of regulators and Congress through 2014.  In fact, Congress summoned Target’s Chief Financial Officer to appear before the Senate Judiciary Committee on February 4th and a House committee is seeking extensive documents from Target about its security program.  Meanwhile, Senator Leahy re-introduced data breach legislation which would set a federal standard for data breach notifications (most states now require notifications, though the requirements differ state-to-state).

Senators Carper and Blunt introduced a separate bipartisan bill intended to establish national data security standards, set a federal breach notification requirement, and also require notification to federal agencies, police, and consumer reporting agencies when breaches affect more than 5,000 persons.  Many companies have suffered data breaches and then faced civil lawsuits under various causes of actions, including allegations that they did not notify customers promptly.  As a result, there may be strong support for federal standards rather than facing a patchwork of state laws. While the Target breach has certainly renewed interest in data security, and we expect Congress will conduct numerous hearings, ultimate passage of data breach legislation this Congress is still probably a longshot.

Watching Wyndham Take on FTC

As covered in this blog, various Wyndham entities have struck back at the FTC, challenging the FTC’s authority to bring an action against Wyndham for alleged data security failures. The Wyndham entities claim that the FTC may not set data security standards absent specific authority from Congress.  Yet, with Congress having not set data security standards thus far, the court in oral arguments seemed concerned about leaving a void in the data security area.  Wyndham’s motion to dismiss remains pending in federal court in New Jersey.  Most observers think the court will be hard pressed to limit the FTC’s authority under Section 5 of the FTC Act, which broadly prohibits ”unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce”  and provides the FTC with administrative and civil litigation enforcement authority.  The agency has used this administrative authority with great success, bringing numerous data privacy actions that usually result in settlements by companies rather than risk further litigation expenses, penalties, and reputational damage.  We think the FTC will remain vigilant in this space, including attention on the security of mobile apps.

Class Actions Jump on Breaches

Whether breaches affect Sony Playstation, Adobe,  Target, or some other company, the class action firms have been busy filing lawsuits based upon data breaches.  For example, by year end, at least 40 suits had already been filed against Target, with seven filed the day Target disclosed the breach.  The plaintiffs use various theories – including violations of consumer protection statutes, negligence, fraud, breach of contract, breach of fiduciary duty, invasion of privacy and conversion.  But, if a consumer’s information was potentially breached, yet nothing happened to the consumer as a result, does that consumer have cognizable damages?  That has been a huge sticking point for these lawsuits.  Yet, the class action lawyers will continue to file these suits and some companies will settle to avoid further reputational damages and litigation expenses.

Don’t Count out the States

States have taken the lead in setting data breach notification standards, and in some cases data security requirements.  For instance, in March 2010, Massachusetts enacted strict data security regulations.  Organizations that own or license personal information of Massachusetts residents are required to develop and implement a written comprehensive information security program (“CISP”) to protect that information.  Almost all of the states have standards setting forth what types of information are covered by data breaches, who gets notified, what content goes in the notifications and, the timing of the notifications.  Multiple states are investigating the Target breach; certainly less well known breaches get state regulators’ attention as well.  We predict the states will continue to be active regulators and enforcers of data security and data breaches, and will likely continue to “rule the roost” while federal legislation lags behind.

Preparation and Training Still Key

We’ve said before that, unfortunately, no company is immune from data breaches.  Companies cannot assume that they have the best anti-malware or security features and that these other newsworthy breaches resulted from lapses that would not apply to them.  Whether it is a sophisticated hacker or, more commonly, a well-meaning but negligent employee, data loss and data breaches will occur.  All organizations should have procedures in place NOW to prevent data loss and to prepare for a breach.  This includes IT, human resources, legal, and communications resources.  Companies should designate a “data security/data breach” team with representatives from these key departments (working with outside counsel and other privacy breach specialists when needed).  The team should meet periodically to review procedures, recommend improvements, and engage in periodic training on data security.

We can’t stress here enough about employee training.  An employee who, for instance, wants to finish a project at home after stopping by the gym might download information that contains sensitive personal information onto a flash drive.  Let’s say the gym bag gets stolen, along with the flash drive.  Well, the employee’s unlucky company may now have a huge data breach situation on its hands requiring notices to customers, state attorneys general, and potential litigation and other expenses (such as paying for creditor monitoring, now industry standard).  Employees need training about securing sensitive information – from shredding documents instead of putting them in the dumpster, to encrypting information that is being taken offsite, to avoiding “phishing” scams, to having unique passwords they change periodically.  According to recent reports, “password” and “123456” are still among the most popular passwords.  While data breaches cannot be avoided completely, we can ameliorate some risks with better practices in our organizations.

Jan 09
2014

Industry, Members of Congress Take Action on FTC Process

As the Federal Trade Commission (“FTC”) continues to flex its consumer protection muscles by bringing numerous administrative lawsuits, industry and members of Congress are questioning whether there is a level playing field that allows companies to properly defend themselves against FTC charges.  Or, as some say, does the FTC have the “home court advantage” in its role as investigator and prosecutor, armed with very broad authority under Section 5 of the FTC Act –leaving many companies to decide simply to settle rather than face the Goliath FTC.  However, some companies have been bucking that trend recently and challenging the FTC’s authority (particularly in the area of regulating data security and FTC officials’ impartiality.

As background, the FTC may begin an enforcement action if it has “reason” to believe that the FTC Act is being or has been violated. Section 5(a) of the FTC Act prohibits “unfair or deceptive acts or practices in or affecting commerce.”  The FTC also enforces several other consumer protection statutes, including the Fair Credit Reporting Act, the Do-Not-Call Implementation Act of 2003, and the Children’s Online Privacy Protection Act.

Under Section 5(b) of the FTC Act, the FTC can challenge “unfair or deceptive acts or practices” or violations of certain other laws (such as those listed above) in an administrative adjudication. The way this works is the FTC issues a complaint putting forth its charges.  Many companies faced with such complaints inevitably settle with the FTC, rather than endure an administrative trial.  Those companies that contest the charges face a trial-type proceeding before an FTC administrative law judge.  FTC staff counsel “prosecute” the complaint.  The administrative law judge later issues an initial decision. Either party can appeal the initial decision to the full FTC for review.

Many observers, including the American Bar Association, have criticized this situation — where the FTC acts as both prosecutor and judge — as inherently unfair. After the FTC’s decision, the respondent organization (or individual)may appeal to a federal court of appeals. However, at this point, an extensive record has been made and this assumes an organization or individual has the resources to devote to a federal appeal. (In addition, the FTC can also bring consumer protection enforcement directly in court rather than through administrative litigation).

The FTC’s winning record in these administrative proceedings has many observers questioning the process and the FTC’s potential impartiality.  House antitrust chairman Spencer Bachus (R-Ala.) called out the FTC’s apparent lack of impartiality and fairness, stating “ a company might wonder whether it is worth putting up a defense at all.”

Just a couple weeks ago, however, medical testing company LabMD went on the offense and sought the disqualification of an FTC Commissioner. Facing an administrative proceeding relating to its alleged failure to secure patient information data, LabMD moved to disqualify Commissioner Julie Brill from consideration of its case.  LabMD claimed that the Commissioner made numerous statements at industry conferences prejudging its ongoing litigation. Specifically, LabMD claimed Brill stated LabMD that had violated the law, rather than indicating that LabMD was under investigation or in litigation.  The FTC opposed the disqualification. However, Commissioner Brill voluntarily recused herself from the case on Christmas Eve to avoid “undue distraction” from the administrative litigation.

As the FTC litigates in several key areas – data privacy, financial services, credit repair, telemarketing – we expect administrative litigation will increase in 2014. While some companies will continue to settle to avoid continued litigation expenses and possible further detrimental outcomes, we think others will take the LabMD route and seek relief when they believe the processes are not transparent or the FTC is exceeding its authority.

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About Ifrah Law

FTC Beat is authored by the Ifrah Law Firm, a Washington DC-based law firm specializing in the defense of government investigations and litigation. Our client base spans many regulated industries, particularly e-business, e-commerce, government contracts, gaming and healthcare.

Ifrah Law focuses on federal criminal defense, government contract defense and procurement, health care, and financial services litigation and fraud defense. Further, the firm's E-Commerce attorneys and internet marketing attorneys are leaders in internet advertising, data privacy, online fraud and abuse law, iGaming law.

The commentary and cases included in this blog are contributed by founding partner Jeff Ifrah, partners Michelle Cohen and George Calhoun, counsels Jeff Hamlin and Drew Barnholtz, and associates Rachel Hirsch, Nicole Kardell, Steven Eichorn, David Yellin, and Jessica Feil. These posts are edited by Jeff Ifrah. We look forward to hearing your thoughts and comments!

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