From: McGuireWoods LLP
Article by Amy R. Worley
Even Where It Has Not Issued Regulations to Set an Acceptable Cyber Security Standard
Since the mid- to late 1990s, the Federal Trade Commission (FTC) has been the leading federal regulator in the field of data privacy and security. It has operated under its general grant of consumer protection authority in the Federal Trade Commission Act (FTCA). The FTCA was enacted in 1914 and obviously was not drafted to address directly Internet-related issues. Privacy lawyers and scholars alike have been wrestling with the question of whether the FTC really has a legislative grant of authority to regulate cybersecurity. But until the FTC sued the hotel chain Wyndham Worldwide, companies that received FTC complaints settled prior to the issue of FTC’s authority being litigated. The somewhat abstruse issue of the FTC’s authority was never given its day in court—until FTC v. Wyndham.
Data privacy and security lawyers have been watching the United States District Court for the District of New Jersey, anticipating that court’s ruling regarding the FTC’s statutory authority to regulate data security practices. Tuesday, April 8, 2014, we finally got an answer. In FTC v. Wyndham Worldwide Corp., et. al., 2:13 CV 01887-ES-JAD (“Wyndham“), the court denied Wyndham’s motion to dismiss the FTC’s complaint against it for violating Section 5 of the FTCA for alleged unfair and deceptive trade practices “in connection with [Wyndham’s] failure to maintain reasonable and appropriate data security for consumers’ sensitive personal information.”
Wyndham had moved to dismiss the FTC’s complaint under Federal Rule of Civil Procedure 12(b)(6), challenging, among other things, the FTC’s authority to regulate data security. Wyndham claimed that FTC had no express statutory authority to regulate cybersecurity; that it did not promulgate regulations that would notify companies of the cyber security standards it seeks to enforce; and that there was not sufficient consumer harm. In a detailed and lengthy opinion, U.S. District Court Judge Esther Salas denied Wyndham’s motion and affirmed FTC’s authority to bring Section 5 unfair and deceptive trade practices actions against companies for cybersecurity-related acts or omissions.
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