FTC: Don’t Blame Us For Anemic Enforcement. Blame Congress

Written by Evan Schuman
February 1st, 2008

When we ran a column last week about the FTC’s rather lax enforcement efforts against an e-tailer who had engaged in especially blatant data security violations, former and current FTC officials reached out.

Yes, it’s never a good idea to ignore E-mails from FTC attorneys. But these folk had some excellent points, most of which amounted to an agreement that the enforcement was lethargic but that Congress is to blame.

The FTC "could have even more of an impact if we had the authority to levy civil penalties in data security cases," said Jessica Rich, assistant director of the division of Privacy and Identity Protection in the FTC’s Bureau of Consumer Protection.

But why have they been able to issue some serious fines against some data-breach retailers—such as their $10 million fine against Choicepoint—and not others? Although many in the data security space believed Choicepoint’s fine was because of especially egregious conduct, it was actually because of a technicality.

Choicepoint’s situation happened to have involved some credit reports, which allowed government lawyers to invoke the Fair Credit Reporting Act, which does allow for financial penalties. (Note to CIOs: If you need to cut data security corners, make sure you safeguard credit reports.)

Granted, had Choicepoint’s actions not been seen as quite severe, the lawyers wouldn’t have bothered.

Don Blumenthal, a former director of the FTC Internet Lab, echoed Rich’s thoughts, but added that some retailers know the law quite well and make spreadsheet investment decisions based on prosecution probabilities.

"I suspect that some enterprises make a cost benefit analysis that includes the supposition that ‘we’re not financial/medical/something else specifically covered by law’ and lowers the priority of security expenditures," Blumenthal said. "It’s possible that the penalties against Life is Good should have been more severe. However, any argument has to be with Congress, not the FTC."


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