FTC to Provide Weekly Insight on Reasonable Data Security

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By Jimmy H. Koo

The Federal Trade Commission will publish a blog every Friday for several months on lessons learned from data security investigations that were closed without formal enforcement action, the FTC announced July 21.

Although the FTC makes public its administrative and federal court resolutions of formal data security enforcement actions, the process of investigations that are resolved short of such an action have been largely opaque. Sharing information on the nonpublic resolutions process may help companies, and their legal counsel, better understand what the FTC expects from companies held to a “reasonable data security” standard.

Christopher N. Olsen, privacy and cybersecurity partner at Wilson Sonsini Goodrich & Rosati PC in Washington, told Bloomberg BNA July 21 that it is a “providing additional guidance about how the FTC is viewing data security” will help businesses going forward. Previously, Olsen was the deputy director of the FTC Bureau of Consumer Protection.

Companies under the FTC’s jurisdiction—from internet giants Amazon.com Inc. and Facebook Inc. to smaller businesses such as now-defunct medical testing laboratory LabMD Inc.—have struggled with what level of data security they must provide to convince the nation’s main data security and privacy enforcement agency that their efforts to protect personal data are reasonable. In the absence of direct data security statutory or regulatory authority, the FTC has relied on the FTC Act’s Section 5, a catch-all prohibition against unfair and deceptive trade practices, to carry out data security compliance actions.

Any information the FTC can offer in terms of how it viewed companies’ data security practices will “help all businesses understand where the lines are,” Olsen said.

‘Common-Sense Security Fundamentals’

The “Stick with Security” blog post initiative will build on the FTC’s “ Start with Security” guidance by using hypothetical examples and highlighting some common themes that have emerged from closed data security investigations, the FTC said.

In the first blog post, FTC Bureau of Consumer Protection Acting Director Thomas B. Pahl said that companies facing investigations that ultimately closed without enforcement action “typically had effective procedures in place to train their staff, keep sensitive information secure, address vulnerabilities, and respond quickly to new threats.” These companies’ practices often mirrored “common-sense security fundamentals,” including only collecting information that companies need and holding on to the data only as long as they had legitimate business needs, Pahl said.

According to Pahl, some reasons the FTC may not pursue enforcement actions include investigations that don’t show actionable violations, the possibility of wasting resources, not being the correct agency to take action, and finding that the risk to data is theoretical.

“For example, there may be a vulnerability in a mobile device that would take highly sophisticated tools to exploit, and even then, data could be compromised only if the hacker had the consumer’s phone in hand,” Pahl said. “If that’s the case, we’re more likely to pass on an investigation than proceed,” he said.

Earlier this week, FTC Acting Chairman Maureen K. Ohlhausen announced reforms to streamline the Bureau of Consumer Protection’s information requests in enforcement cases and reduce burdens on companies.

To contact the reporter on this story: Jimmy H. Koo in Washington at jkoo@bna.com

To contact the editor responsible for this story: Donald Aplin at daplin@bna.com

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