Menu
Court: FTC can bring down the hammer on companies with sloppy cybersecurity

Court: FTC can bring down the hammer on companies with sloppy cybersecurity

Hotel chain Wyndham had challenged the FTC's authority to mandate cybersecurity standards

The U.S. Federal Trade Commission has the authority to take action against companies that fail to protect customer data, an appeals court ruled Monday.

The U.S. Court of Appeals for the Third Circuit upheld the FTC's 2012 lawsuit against hotel and time-share operator Wyndham Worldwide. The FTC filed a complaint against Wyndham for three data breaches in 2008 and 2009 that led to more than US $10.6 million in fraudulent charges.

The appeals court ruling, upholding a 2014 district court decision, suggests the FTC can hold companies responsible for failing to use reasonable security practices.

Wyndham was one of two companies that had challenged the FTC's authority to enforce cybersecurity standards under the unfair and deceptive practices provisions of the FTC Act. Critics have argued the agency has no clearly defined cybersecurity standards for companies to follow.

Representatives of Wyndham and the FTC didn't immediately respond to requests for comment on the appeals court ruling.

The FTC accused the hotel operator of using cybersecurity practices that "unreasonably and unnecessarily exposed consumers' personal data to unauthorized access and theft."

The company's hotels stored payment card information in clear, readable text, and it used easily guessed passwords to access its property management systems, the FTC alleged. The company also failed to use "readily available security measures" such as firewalls to limit access between the company's property management systems, its corporate network and the Internet, the FTC charged.

Wyndham's privacy policy said the company safeguards customer data "using industry-standard practices," the FTC said.

Wyndham argued on appeal that its conduct did not meet the congressional definition in the FTC Act of "unfair." The company argued that its actions were not unfair because it was the victim of criminals.

Appeals court Judge Thomas Ambro rejected that argument. The company "offers no reasoning or authority for this principle, and we can think of none ourselves," he wrote in Monday's decision.

A company's action can be unfair if it is likely to cause customer injury, and the injuries caused by a third party were foreseeable, he wrote.

Ambro also rejected Wyndham's argument that the FTC's cybersecurity rules are too vague. The unfairness standard in the FTC Act focuses on the substantial injury to consumers that they cannot reasonably avoid themselves, he wrote. "While far from precise, this standard informs parties that the relevant inquiry here is a cost-benefit analysis," he added.


Follow Us

Join the New Zealand Reseller News newsletter!

Error: Please check your email address.

Featured

Slideshows

Kiwi channel comes together to kick-off 2017 Reseller News ICT Industry Awards

Kiwi channel comes together to kick-off 2017 Reseller News ICT Industry Awards

The cream of the Kiwi channel came together at the Hilton Hotel in Auckland, to acknowledge and celebrate an esteemed panel of over 80 local judges ahead of the 2017 Reseller News ICT Industry Awards in October. Photos by Maria Stefina.

Kiwi channel comes together to kick-off 2017 Reseller News ICT Industry Awards
Tight lines as Hooked on Lenovo catches up at Great Barrier Island

Tight lines as Hooked on Lenovo catches up at Great Barrier Island

​Ingram Micro’s Hooked on Lenovo incentive programme recently rewarded 28 of New Zealand's top performing resellers with a full-on fishing trip at Great Barrier Island for the third year​ in a row.

Tight lines as Hooked on Lenovo catches up at Great Barrier Island
Inside the AWS Summit in Sydney

Inside the AWS Summit in Sydney

As the dust settles on the 2017 AWS Summit in Sydney, ARN looks back an action packed two-day event, covering global keynote presentations, 80 breakout sessions on the latest technology solutions, and channel focused tracks involving local cloud stories and insights.

Inside the AWS Summit in Sydney
Show Comments