FTC complaint against LabMD could serve as guidance to businesses on data security
The complaint provides what could be useful guidance as to what types of practices the FTC considers to be problematic practices under the Act:
10. At all relevant times, respondent engaged in a number of practices that, taken together, failed to provide reasonable and appropriate security for personal information on its computer networks. Among other things, respondent:
(a) did not develop, implement, or maintain a comprehensive information security program to protect consumers’ personal information. Thus, for example, employees were allowed to send emails with such information to their personal email accounts without using readily available measures to protect the information from unauthorized disclosure;
(b) did not use readily available measures to identify commonly known or reasonably foreseeable security risks and vulnerabilities on its networks. By not using measures such as penetration tests, for example, respondent could not adequately assess the extent of the risks and vulnerabilities of its networks;
(c) did not use adequate measures to prevent employees from accessing personal information not needed to perform their jobs;
(d) did not adequately train employees to safeguard personal information;
(e) did not require employees, or other users with remote access to the networks, to use common authentication-related security measures, such as periodically changing passwords, prohibiting the use of the same password across applications and programs, or using two-factor authentication;
(f) did not maintain and update operating systems of computers and other devices on its networks. For example, on some computers respondent used operating systems that were unsupported by the vendor, making it unlikely that the systems would be updated to address newly discovered vulnerabilities; and
(g) did not employ readily available measures to prevent or detect unauthorized access to personal information on its computer networks. For example, respondent did not use appropriate measures to prevent employees from installing on computers applications or materials that were not needed to perform their jobs or adequately maintain or review records of activity on its networks. As a result, respondent did not detect the installation or use of an unauthorized file sharing application on its networks.
11. Respondent could have corrected its security failures at relatively low cost using readily available security measures.
12. Consumers have no way of independently knowing about respondent’s security failures and could not reasonably avoid possible harms from such failures, including identity theft, medical identity theft, and other harms, such as disclosure of sensitive, private medical information.
LabMD will likely respond that the FTC should have published these as a guideline before going after companies for not complying with them, but other businesses may want to use this complaint for their own guidance. In the meantime, LabMD continues complaining vociferously about the FTC’s action.
Update: Woody Harzog reminded me this morning that his article with Dan Solove contains a taxonomy based on FTC’s data security complaints. You can download their article from SSRN. The taxonomy is pp. 44-47.