Case Studies: Recent FTC Enforcement Actions - High-Profile Cases of Privacy Violation: Uber, Emp Media, Lenovo, Vizio, VTech, LabMD
The scenario: In August 2018, the FTC announced an expanded settlement with Uber Technologies for its alleged failure to reasonably secure sensitive data in the cloud, resulting in a data breach of 600,000 names and driver's license numbers, 22 million names and phone numbers, and more than 25 million names and email addresses.
Emp Media Inc. (Myex.com)
The scenario: The FTC joined forces with the State of Nevada to address privacy issues arising from the "revenge" pornography website, Myex.com, run by Emp Media Inc. The website allowed individuals to submit intimate photos of the victims, including personal information such as name, address, phone number and social media accounts. If a victim wanted their photos and information removed from the website, the defendants reportedly charged fees of $499 to $2,800 to do so.
The settlement: On June 15, 2018, the enforcement action brought by the FTC led to a shutdown of the website and permanently prohibited the defendants from posting intimate photos and personal information of other individuals without their consent. The defendants were also ordered to pay more than $2 million.3
Lenovo and Vizio
The scenario: In 2018, FTC enforcement actions led to large settlements with technology manufacturers Lenovo and Vizio. The Lenovo settlement related to allegations the company sold computers in the U.S. with pre-installed software that sent consumer information to third parties without the knowledge of the users. With the New Jersey Office of Attorney General, the FTC also brought an enforcement action against Vizio, a manufacturer of "smart" televisions. Vizio entered into a settlement to resolve allegations it installed software on its televisions to collect consumer data without the knowledge or consent of consumers and sold the data to third parties.
The settlement: Lenovo entered into a consent agreement to resolve the allegations through a decision and order issued by the FTC. The company was ordered to obtain affirmative consent from consumers before running the software on their computers and implement a software security program on preloaded software for the next 20 years.4 Vizio agreed to pay $2.2 million, delete the collected data, disclose all data collection and sharing practices, obtain express consent from consumers to collect or share their data, and implement a data security program.5
The scenario: The FTC's action against toy manufacturer VTech was the first time the FTC became involved in a children's privacy and security matter. The settlement: In January 2018, the company entered into a settlement to pay $650,000 to resolve allegations it collected personal information from children without obtaining parental consent, in violation of COPPA. VTech was also required to implement a data security program that is subject to audits for the next 20 years.6
The scenario: LabMD, a cancer-screening company, was accused by the FTC of failing to reasonably protect consumers' medical information and other personal data. Identity thieves allegedly obtained sensitive data on LabMD consumers due to the company's failure to properly safeguard it. The billing information of 9,000 consumers was also compromised. The settlement: After years of litigation, the case was heard before the U.S. Court of Appeals for the Eleventh Circuit. LabMD argued, in part, that data security falls outside of the FTC's mandate over unfair practices. The Eleventh Circuit issued a decision in June 2018 that, while not stripping the FTC of authority to police data security, did challenge the remedy imposed by the FTC.7 The court ruled that the cease-and-desist order issued by the FTC against LabMD was unenforceable because the order required the company to implement a data security program that needed to adhere to a standard of "reasonableness" that was too vague.8
The ruling points to the need for the FTC to provide greater specificity in its cease-and-desist orders about what is required by companies that allegedly fail to safeguard consumer data.
1 15 U.S.C. § 45(a)(1)
7 The United States Court of Appeals for the Third Circuit has rejected this argument. See FTC v. Wyndham Worldwide Corp., 799 F.3d 236, 247-49 (2015).
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