TJX Settlement: Is This Really The Message We Want Sent?
Written by Evan SchumanWhen a group of 41 U.S. states announced a settlement with TJX this week—a supposed punishment for the retail chain, in the words of one state attorney general, for treating sensitive payment card information “like trash”—it was billed in some circles as a painful lesson for retailers who treat security laxly. The truth is, the lesson was just the opposite.
The deal (see our full coverage of the terms of the settlement) consisted of three elements: Payment; new security rules; the need to report back to the states. How painful were any of those elements for the $19 billion owner of Marshalls, T.J. Maxx, HomeGoods, A.J. Wright, HomeSense and Winners? Let’s take a look at each.
At a glance, a payment of almost $10 million sounds like a lot, until you delve deeper. None of the dollars were punitive per se. The smallest slice–$1.75 million—went to reimburse the legal and administrative costs of the states investigating the breach and negotiating this settlement for two-and-a-half years.
Two ways of looking at that. The happy way: For 41 states to be involved for 2-and-a-half years, $1.75 million isn’t bad.
The unhappy way: What the heck took 30 months? If TJX was as cooperative as the AGs said it was (why wouldn’t they be? They got their own state AG’s office—Massachusetts—to head up the probe. You don’t score political points by beating up one of your state’s largest employers), how many weeks could it have taken to have established this report? (As a colleague used to say when covering federal prosecutors, “Justice delayed is Justice Department.”)
The conclusions in the report included no information that was not widely known—and widely reported—within a few weeks of the January announcement of the breach. Assuming their probe went beyond reading the local newspaper, the evidence wasn’t demonstrated in the published settlement. And if the quality of the evidence gathered is hinted at by the lopsided TJX-friendly settlement, TJX may want to audit that $1.75 million figure.
Let’s get back to the money. Another $8 million seems to be for funding state programs to pay ways the states can investigate such actions in the future. Specifically, that breaks down to $2.5 million that “will fund a Data Security Trust Fund to be used by the state Attorneys General to advance enforcement efforts and policy development in the field of data security and protecting consumers’ personal information” and $5.5 million for general “data protection and consumer protection efforts by the states.”
How much is this going to hurt TJX? Well, TJX itself pointed out “the cost for this settlement is already reflected in the reserve that TJX established in 2007.” In other words, when TJX set aside some $216 million for breach-related costs in 2007, they could have handled this payment then—more than 22 times over, in fact. Heck, the initial insurance check that TJX received alone would have covered this settlement, with $9.25 million left over.
Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code.
-Marc
