United States: Latest On The FTC Data Security Front

On October 25, 2016, the Federal Trade Commission (FTC) issued a guide — Data Breach Response: A Guide for Business — on steps companies should take in responding to a data breach. This latest regulatory guidance at the federal level is only the most recent in a long list of resources with which companies that deal in data (yes, that means every company) are expected to acquaint themselves for purposes of their incident response preparedness efforts. Those resources include, but are not limited to, the 47 state breach notification laws (constantly subject to amendment) and related State Attorney General guidance, the Health Insurance Portability and Accountability Act (HIPAA), and FTC consent decrees entered into with organizations that have been the victims of a data security breach and with respect to which the FTC has brought an enforcement action under its Section 5 authority.

A few weeks later, on November 10, 2016, the Eleventh Circuit Court of Appeals issued an order in the long-running and much-watched LabMD data security breach matter staying the FTC's order in that case and, in so doing, questioning the reasonableness of the FTC's interpretation of the unfairness standard under Section 5 pursuant to which it takes enforcement action for allegedly deficient data security practices.

Below we lay out some key takeaways from the FTC's new data breach guide and explain what really happened at the Eleventh Circuit (not exactly what the media reported). The following must be prefaced with a significant disclaimer — the recent Presidential election is likely to have an impact on the FTC's current approach to data security enforcement and it is far too early to gaze into our crystal balls on that front.

With that, a few takeaways:

1. The Historical Pattern is One of Continued and Increasingly Aggressive FTC Enforcement of Data Security Practices

The data breach guide is the latest signal from the FTC that it means business about data security. To date, the FTC has brought over 60 enforcement actions against companies under Section 5 of the FTC Act for what it alleges are unfair or deceptive data security acts or practices. The data breach guide also follows two recent guides from the FTC on how to protect personal information and how to keep data secure, as well as statements by FTC Chairwoman Edith Ramirez strongly suggesting that failure by companies to address system vulnerabilities could lead to FTC enforcement. For the most part, in the past, the FTC has pointed to consent decrees reached with alleged violators in order to educate companies about expected practices related to data security. The data breach guide, along with the FTC's other recent guides and statements, gives the FTC additional footing to argue that companies are or should be on notice as to the FTC's expectations. That being said, some organizations and senators continue to challenge the FTC's enforcement authority, and the Donald Trump Administration may mean a dialing back of the FTC's aggressive pursuit of organizations, large and small, that it views as having deficient security practices. Nonetheless, companies should assume for now that the FTC, as well as State Attorneys General, will continue to bring enforcement actions. As such, organizations should endeavor to incorporate the FTC's guidance and State Attorney General guidance as to what constitutes "reasonable security" into their own internal data security practices and policies.

2. If A Breach is Suspected or Occurs, Secure, Fix and, Possibly, Notify

The data breach guide outlines expected response measures in three parts — securing operations, fixing vulnerabilities, and notifying appropriate parties.

Setting aside the data breach guide, even just as a matter of best practice, securing operations in the wake of a breach should be priority number one. Upon discovering a suspected or actual breach, companies should secure both physical areas and potentially affected networks. For example, companies should, depending on the circumstances, consider changing lock and access codes, taking affected equipment offline, resetting user credentials and passwords, and interviewing anyone (internal and external) who might have relevant information. The FTC recommends that companies assemble a team of experts to assist with this process, which may include forensic investigators, legal counsel, and other specialists. All this being said, it is critical that organizations not jump the gun and delete log files or other critical evidence that might help determine the existence, breadth and scope of a breach, or even help establish that no breach actually occurred. As such, the FTC correctly stresses that companies must not destroy any forensic evidence during this process — for instance, taking affected equipment offline before a forensic investigator arrives could constitute a destruction.

Fixing vulnerabilities focuses on preventing additional data loss, i.e., containing the incident. Companies should work with forensic investigators to evaluate their encryption methods, network segmentation plans, backup and preserved data, and access restrictions. Where data breaches involve service providers, companies must ensure that those service providers take necessary steps to help ensure another similar incident does not occur. The FTC highlights that companies should implement any recommended remedial measures as soon as possible, and verify that their service providers have actually fixed internal vulnerabilities. In addition (while not clear as to why it falls under the topic of "fixing vulnerabilities"), the FTC also specifies that companies should have a comprehensive plan to address questions related to the breach, and provide clearly written questions and answers on their websites.

The third measure, notifying appropriate parties, requires companies to review applicable data breach laws and determine whether those laws require notification of the applicable state (and possibly federal under HIPAA) regulators, individuals whose information has been compromised, business partners or vendors affected by the breach, law enforcement, credit card companies and/or banks if the breach involves credit card or bank numbers, and credit bureaus. The FTC recommends that companies consult with law enforcement prior to notifying affected individuals, designate a point person with the company regarding the breach, and offer at least one year of free credit monitoring or other support if the breach involves financial information or Social Security numbers. This echoes the long-time recommendations of many State Attorneys General.

3. Notice Content Should Reflect State Law Requirements (Plus a Little Bit More)

The data breach guide sets out what must be disclosed to affected individuals in situations where notice is required. Unless the applicable state law provides otherwise, companies should describe how the breach happened, what information was taken, how the thieves used the information (if thieves are involved), what actions have been taken by the company to remedy the situation, what actions have been taken by the company to protect the affected individuals, and how to reach the relevant contact at the company. The FTC provides a model letter for notification on page 10— that letter might look familiar as it essentially mirrors the model letter under California law. However, the FTC model letter includes several minor additions, including describing how the company will contact consumers in the future, providing information about the law enforcement agency working on the case (if the law enforcement agency agrees), and enclosing/linking to the FTC's Identity Theft: A Recovery Plan and identity theft website.

4. The Eleventh Circuit Cast Doubt on the FTC's Interpretation of its Unfairness Authority Under Section 5 in Data Security Matters, But Did Not Revise the Unfairness Standard

The Eleventh Circuit's November 10, 2016 order in the LabMD case did not, contrary to some headlines, "narrow" the FTC's unfairness standard in data security cases. The decision was a procedural one. The Court found, in the context of determining whether a stay was appropriate, that LabMD made a substantial case on the merits and presented a serious legal question by making a showing that the FTC's interpretation of Section 5 "may" not be reasonable because "it is not clear that" a reasonable interpretation of Section 5 includes intangible harms or that the FTC reasonably interpreted "likely to cause" since it found that phrase to mean "significant risk" instead of "probable". The Eleventh Circuit's ruling is not on the merits. That being said, it is significant that at least one appellate court has questioned the FTC's confidence in asserting its Section 5 unfairness authority in cases where harm is merely speculative.

We have certainly not seen the last of this saga — either in the LabMD case itself or more broadly with respect to the FTC's unfairness authority and future plans for data security enforcement. We will keep you posted during the Trump years and beyond.


This alert provides general coverage of its subject area. We provide it with the understanding that Frankfurt Kurnit Klein & Selz is not engaged herein in rendering legal advice, and shall not be liable for any damages resulting from any error, inaccuracy, or omission. Our attorneys practice law only in jurisdictions in which they are properly authorized to do so. We do not seek to represent clients in other jurisdictions.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Skadden, Arps, Slate, Meagher & Flom (UK) LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Skadden, Arps, Slate, Meagher & Flom (UK) LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions