House Energy & Commerce Subcommittee Holds Hearing on Data Security

by Akin Gump Strauss Hauer & Feld LLP
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On February 5, the House Energy & Commerce Subcommittee on Commerce, Manufacturing and Trade held a hearing titled “Protecting Consumer Information: Can Data Breaches Be Prevented?” The hearing follows two consecutive Senate hearings this week on the same topic and featured testimony from representatives from the Federal Trade Commission (FTC), U.S. Secret Service, Department of Homeland Security (DHS), Target, Neiman Marcus and data security firms, as well as Illinois Attorney General Lisa Madigan.

The first panel of witnesses, consisting of FTC Chairwoman Edith Ramirez, U.S. Secret Service Deputy Special Agent in Charge William Noonan, Attorney General Madigan, and DHS National Cyber and Communications Integration Center Director Lawrence Zelvin, focused on whether Congress should grant regulators and law enforcement additional authority to establish and enforce data security and notification standards. Chairwoman Ramirez reiterated her agency’s call for a national data security standard and breach notification requirement. Attorney General Madigan also called for a national standard, but held the stance that any federal standard should not preempt existing state standards, so long as a state’s standard was equal to or stronger than the national standard. Attorney General Madigan also testified that, in the course of her research and investigation, she has found that “the notion that companies are doing all they can [to secure personal customer data] is false.” She repeatedly pointed to these discoveries to make the case for a national standard. The Attorney General also recommended the creation of a data breach investigative body modeled on the National Transportation Safety Board that would be tasked with investigating the failures of companies to reasonably secure their customers’ data. The DHS and Secret Service witnesses gave detailed testimony about their investigative actions in the wake of the recent data breaches at several retailers.

During the second panel, witnesses from Target and Neiman Marcus reprised their testimony from the previous Senate hearing, again offering apologies to their customers and explaining their role in the breach investigations and the measures they have taken to remedy potential harm to their customers. Bob Russo of PCI Security Standards discussed the work his firm has done to improve payment card data security around the globe, while Phillip Smith from Trustwave described his firm’s experience in consulting on data security for other companies.

As in the previous Senate Judiciary Committee hearing, government witnesses, as well as the retailer witnesses, faced a large amount of scrutiny regarding the recent data breaches, including when they were discovered, how the breaches were carried out and the results of the current investigations. In general, members of the Subcommittee agreed that the United States is facing a rising tide of malicious cyber attacks and that the federal government must work together with states and private industry to develop better protections against data theft. Many of the witnesses supported a federal standard for data security and breach notification, so long as the standard is developed through a stakeholder process and provides sufficient flexibility to adapt to ever-changing technology. Republican members of the Subcommittee, in particular Chairman Lee Terry (R-NE), took this sentiment further, arguing that private industry (rather than the federal government) should take the lead in developing best practices, which could then be adopted into a national standard.

On February 6, the Obama Administration announced it has invited privacy and civil liberties groups to meet at the White House for an “informal conversation to discuss issues at the intersection of Big Data and Privacy” and an opportunity to “help frame the efforts” of the Big Data review President Obama announced during a speech on proposed reforms to the nation’s surveillance practices.

Despite the recent focus on data security, several other priorities hold Congress’s immediate attention, including raising of the debt ceiling, finalization of a budget agreement and immigration reform. While it is possible that additional hearings or mark-ups of recently introduced legislation will be held, they have yet to be scheduled. Many of the legislative data security proposals vary from committee to committee, so it is unclear whether a bipartisan bicameral consensus can be reached in this Congress.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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