On January 21, 2014, the Federal Trade Commission ("FTC") announced agreements ("Settlements") with twelve companies to settle the FTC’s claims that each of the companies had falsely represented that they were in compliance with the U.S.-E.U. and U.S.-Swiss Safe Harbor Frameworks ("Safe Harbor Program").1 Among the twelve settling companies are Level 3 Communications, LLC, one of the world’s largest internet service providers; Apperian, Inc., a provider of mobile applications for businesses; and PDB Sports, Ltd., the limited partnership that owns the Denver Broncos.2 Participation in the Safe Harbor Program offers a streamlined means for U.S. companies to receive personal data in the U.S. from the E.U. or Switzerland in compliance with foreign data privacy laws.3 The Settlements appear to demonstrate increased interest on the part of the FTC in enforcing Safe Harbor Program requirements, which may be aimed at convincing the European Commission that the Safe Harbor Program is still viable.4 As a result, companies that have elected to participate in the Safe Harbor Program should conduct periodic internal reviews of their compliance and consider setting up internal controls to ensure that such compliance is maintained.

Participation in the Safe Harbor Program is entirely voluntary and is initiated by a company's self-certification of compliance with the Safe Harbor "Privacy Principles."5 The Privacy Principles include notice, choice, onward transfers, access, security, data integrity, and enforcement. The company must also state in a published privacy policy that it complies with the Privacy Principles, and continued participation requires annual updating or reaffirmation of the self-certification letter.6

The Settlements resolve allegations that each of the twelve companies represented in its privacy policies that it was compliant with the Safe Harbor Program, despite having allowed its participation to lapse through failure to recertify.7 The FTC characterized these representations as deceptive practices that violated Section 5 of the FTC Act.8 The Settlements enjoin the companies from misrepresenting their compliance with any governmental or self-regulatory data privacy program for twenty years and impose detailed record-keeping requirements for five years, including maintenance of records for all advertisements or other statements containing representations of privacy program participation and all materials relied upon in preparing such representations.9 If the companies violate the Settlements, the FTC is empowered to assess up to $11,000 per day in monetary penalties.10 The Settlements make clear that companies that have self-certified in the past should ensure that they have properly recertified, or if not, that they have removed any representation of Safe Harbor Program compliance from their privacy policies.

In addition, the Settlements evidence a renewed focus at the FTC on Safe Harbor Program enforcement, arguably in response to recent European Commission criticism that the Safe Harbor Program, as enforced, does not sufficiently protect the privacy rights of E.U. citizens.11 The European Commission has released thirteen recommendations to improve the Safe Harbor Program, calling on U.S. authorities to propose remedies by mid-2014, and may suspend or modify the Safe Harbor Program if it remains unsatisfied.12 Responding to these developments, FTC Chairwoman Edith Ramirez stated in a recent address that the FTC "will continue to make Safe Harbor a top enforcement priority" and that more Safe Harbor Program matters are "in the enforcement pipeline."13

While it is unclear what else the FTC may have planned, pressure on the FTC to enforce the Safe Harbor Program undoubtedly means pressure on companies to properly ensure compliance. The Settlements address misrepresentations regarding participation in the Safe Harbor Program, but the FTC has also, in the past, brought claims addressing substantive violations of Safe Harbor Program requirements against companies including Myspace.14 Thus, companies should take the time now to review their compliance with the Safe Harbor Program and institute controls designed to ensure not only that compliance is maintained, but that company policies and procedures relating to transfers of personal data follow the best practices of companies operating in the E.U.

[1] - Press Release, FTC, FTC Settles with Twelve Companies Falsely Claiming to Comply with International Safe Harbor Privacy Framework (Jan. 21, 2014), available at http://www.ftc.gov/news-events/press-releases/2014/01/ftc-settles-twelve-companies-falsely-claiming-comply (hereinafter, "Press Release").
[2] - Id. The FTC noted in the Press Release that the settling companies "represent a cross-section of industries" and handle a variety of different types of consumer information, including health and employment information.
[3] - See Export.gov, Welcome to the U.S.-EU & U.S.-Swiss Safe Harbor Frameworks, available at http://export.gov/safeharbor/index.asp
[4] - See Viviane Reding, Vice-President, European Commission, "Mass Surveillance is Unacceptable – U.S. Action to Restore Trust is Needed Now," Address before the European Parliament Civil Liberties Committee Hearing on Data Protection and U.S. Surveillance (Dec. 9, 2013), available at http://europa.eu/rapid/press-release_SPEECH-13-1048_en.htm (hereinafter "Reding Address").
[5] - Export.gov, U.S.-EU Safe Harbor Overview, available at http://export.gov/safeharbor/eu/eg_main_018476.asp
[6] - Id.
[7] - See, e.g., Level 3 Communications, LLC, Case No. 142-3028 (F.T.C.) (complaint), available at http://www.ftc.gov/sites/default/files/documents/cases/140121level3cmpt.pdf; Apperian, Inc., Case No. 142-3017 (F.T.C.) (complaint), available at http://www.ftc.gov/sites/default/files/documents/cases/140121apperiancmpt.pdf; PDB Sports, Ltd., Case No. 142-3025 (F.T.C.) (complaint), available at http://www.ftc.gov/sites/default/files/documents/cases/140121denverbroncoscmpt.pdf
[8] - See 15 U.S.C. § 45(a)(1) (prohibiting unfair or deceptive practices in or affecting commerce).
[9] - See Level 3 Communications, LLC, Case No. 142-3028 (F.T.C. Jan. 21, 2014) (agreement containing consent order), available at
[10] - See id. See also Export.gov, Safe Harbor Enforcement Overview, available at http://export.gov/safeharbor/eu/eg_main_018481.asp  
[11] - See Reding Address.
[12] - See Press Release, European Union, Restoring Trust in EU-US Data Flows – Frequently Asked Questions (Nov. 27, 2013), available at http://europa.eu/rapid/press-release_MEMO-13-1059_en.htm 
[13] - Edith Ramirez, Chairwoman, FTC, "Protecting Consumers and Competition in a New Era of Transatlantic Trade," Keynote Address before the Transatlantic Consumer Dialogue, Oct. 29, 2013, available at http://www.ftc.gov/sites/default/files/documents/public_statements/protecting-consumers-competition-new-era-transatlantic-trade/131029tacdremarks.pdf
[14] - Privacy Enforcement and Safe Harbor: Comments of FTC Staff to European Commission Review of the U.S.-EU Safe Harbor Framework, Nov. 12, 2013, available at http://www.ftc.gov/sites/default/files/documents/public_statements/privacy-enforcement-safe-harbor-comments-ftc-staff-european-commission-review-u.s.eu-safe-harbor-framework/131112europeancommissionsafeharbor.pdf