A Year in Review: FTC Data Privacy Actions and its Impacts on 2017 and Beyond

by Proskauer - Privacy & Data Security

Whether it means taking a prominent role shaping data security for the Internet of Things, or addressing high profile breaches, the FTC has adopted an active position in policing data privacy and security. And, as data becomes increasingly digital in its form and protections, data security is of paramount importance for all types of intelligence—whether financial, medical, or otherwise sensitive.  The Commission’s emphasis on these areas has not slowed, even as the composition of the Bureau of Consumer Protection changes under a new administration.  The FTC’s actions over the past year reflect that Commission’s continued emphasis on data privacy and its recent data privacy settlements have provided companies with a trail of breadcrumbs from which they can extract lessons learned and help avoid potential FTC scrutiny.

The Commission has not adopted a particular “test” for whether they should bring an action. However, they have previously abided by a general standard that its data privacy enforcement actions were part of “an ongoing effort … to ensure that companies take reasonable and appropriate measures to protect consumers’ personal data.” Though the FTC’s litmus test may seem opaque, its focus has centered on two scenarios representing threats to private data: (1) when a company deceives consumers either through false representations of data security or misappropriations of private data; or (2) when a company fails to properly protect the data from hacking, and risks (or suffers) a breach. [1]

The FTC has taken a preventative approach to policing deceptive statements about privacy, in which companies’ advertising presents a false front about the level of security of consumer data. Over the past year, the Commission reached settlements with three different companies—Practice Fusion, Very Incognito Technologies, and Turn, Inc.—in various actions in which the Commission alleged the companies made misrepresentations about data privacy.

Practice Fusion, an electronic health record company, was alleged to have misled customers about the privacy of their online physician reviews. Consumers believed that their reviews would be shared only with their providers, and were apparently unaware that such reviews would be publically posted and attributed to the patient, which led to the “public disclosure of patients’ sensitive personal and medical information.” Per the terms of its settlement with the FTC, Practice Fusion was required to delete all reviews collected during the time period of the complaint, disclose the fact that they are not protecting the confidentiality of the collected information, and obtain affirmative consent from consumers with conspicuously disclosed facts.

In another action, the Commission alleged that VipVape, a hand-held vaporizer distributor, was accused of deceiving customers by falsely claiming membership in a specific cross-border privacy system (APEC CBPR) that was founded on nine specific data privacy principles, including notice and security safeguards. According to the FTC, VipVape was not and never had been a certified participant in ABEC CBPR.  Then-Chairwoman Edith Ramirez commented on the potential harm to consumers, stating that “Consumers should be able to rely on a company’s claim that it is a certified participant in an international program designed to protect their personal information.” Under the terms of their settlement, VipVape cannot misrepresent its participation or membership in any privacy/security program that is government sponsored or self-regulating.

Finally, Turn, a digital advertising company, was accused of improperly collecting unique identifiers for millions of wireless customers despite language in its privacy policy that led customers to believe that they could “block targeted advertising by using their web browser’s settings to block or limit cookies.” Given this alleged misrepresentation, the Commission’s accepted settlement terms required Turn to provide an effective “opt-out” for consumers who do not want their information used for targeted ads and provide a link on their homepage explaining what information it accepts.

The FTC takes a more retrospective and retributive approach to policing data breaches, as they represent actual harm in the FTC’s view, and not simply prospective harm caused by informational misrepresentations.

Ashley Madison was recently subject to one of the more notable corporate attacks, as it failed to protect customer data for 36 million users accounts linked to the anonymous affair-friendly site—including some users that had paid for a “Full Delete” of personal information. The settlement required Ashley Madison to make $1.6 million in payments to various federal and state officials, as well as implement a comprehensive data-security program along with third-party assessments. The FTC identified four Ashley Madison practices, which together, they alleged, failed to amount to reasonable data security: (1) lack of a written information security policy; (2) failure to implement reasonable access controls; (3) failure to properly train Ashley Madison personnel about data security; and (4) failure to monitor third-party service providers.  These “basic principles,” the FTC said, were all outlined in the FTC’s Start with Security publication, which offers businesses “lessons learned from FTC cases.”

The FTC’s continued focus on the Internet of Things was evident in its settlement with ASUSTek, which suffered a steep penalty when it failed to secure cloud services for its router software from breach. Even though ASUS marketed its hardware as safe from outside attacks, security flaws in the routers allegedly placed the home networks of hundred of thousands of customers who purchased ASUS routers at risk. These risks came to roost in 2014 when hackers gained access to nearly 13,000 connected devices.  In reaching settlement with ASUS, then-Director of the FTC’s Bureau of Consumer Protection, Jessica Rich commented that “the Internet of Things is growing by leaps and bounds, with millions of consumers connecting smart devices to their home networks .. . . so it is critical that companies like Asus put reasonable security in place to protect consumers and their personal information.” The settlement prohibited ASUS from misrepresenting (1) the extent to which it protects security and privacy of devices and consumer information; (2) the extent to which consumers can use ASUS devices to secure networks; and (3) the extent to which ASUS devices use up-to-date software.  ASUS was also required to establish, implement, and maintain a comprehensive security program, obtain biennial security assessments from a third party professional, and notify consumers at multiple contact points when software updates are available.

There are several takeaways that businesses can gather from the FTC’s recent actions. First, businesses are advised to ensure that their statements and representations about the security of their products and the confidentiality of information they collect are accurate and up-to-date, and that their data practices, which would not be obvious to the reasonably person, are conspicuously disclosed. Second, the Commission views “reasonable” data security as a constantly evolving concept, and businesses need to consider data security as an ongoing and changing obligation.  And, third, should a business suffer a data breach, the FTC’s concerns extend beyond the fact of whether the breach occurred, and include whether the company that suffered the breach employed safeguards that reduce potential risk to consumers.

[1] In addition to reaching a number of settlements in the data privacy space, the FTC has also shown a willingness to litigate. The FTC is currently litigating a challenge against an Internet of Things manufacturer, in a case in the Northern District of California against D-Link Systems.  The Commission alleges violations of Section 5 of the FTC Act, including that D-Link engaged in unfair and deceptive trade practices by failing to take reasonable steps to secure their routers and IP cameras.”  According to the FTC’s Complaint, D-Link’s routers and cameras were subject to “widely known and reasonably foreseeable risks of unauthorized access,” resulting in great potential harm to consumers, including the risk that “an attacker could compromise a consumer’s IP camera, thereby monitoring consumers’ whereabouts to target them for theft or other criminal activity or to observe and record over the Internet their personal activities and conversations or those of their young children.”

[View source.]

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.

© Proskauer - Privacy & Data Security | Attorney Advertising

Written by:

Proskauer - Privacy & Data Security

Proskauer - Privacy & Data Security on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.