Businesses have yet another reason to guard against data breaches.
As K&L Gates partners Roberta Anderson and Martin Stern and associate Jenny Paul explained on TMT Law Watch, a New Jersey district court judge recently ruled that the Federal Trade Commission can bring enforcement actions against companies for breaches as an unfair practice under the FTC Act.
The attorneys said the FTC sued Wyndham Worldwide Corporation and several of its subsidiaries in 2012, alleging that the “companies’ failure to maintain reasonable and appropriate data security for consumers’ sensitive personal information” violated the act’s prohibition against unfair or deceptive acts or practices affecting commerce.
One of the subsidiaries, Wyndham Hotels and Resorts LLC, moved to dismiss part of the action, arguing that the FTC didn’t have the authority to bring an “unfairness” claim that involved data security, they said. But the court disagreed.
Anderson and Stern said Wyndham also argued the FTC had to publicize the regulations to provide fair notice of the data security standards it required but the court determined that taking such an action was not the only way to do so. It noted that Section 5 of the FTC Act itself provides a three-part test for determining whether an act or practice is unfair, suggesting entities could also look to complaints, consent agreements and public statements to figure out the FTC’s standard for bringing an unfairness claim under the Act.
Sherry Karabin is a freelance writer and reporter in New York City. Email: sherry.karabin@yahoo.com
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