Companies should already know how to protect data, FTC argues

[Audrey McNeil <audrey () riskbasedsecurity com>]

http://www.networkworld.com/news/2014/053014-companies-should-already-know-how-282091.html?source=nww_rss

The Federal Trade Commission (FTC) has published enough information
publicly for companies to know exactly what the agency considers reasonable
security practices for protecting sensitive data, an FTC representative
said in deposition entered this week in a closely watched case challenging
its authority to enforce data security standards.

"The [FTC] has published a great deal of consumer and business education on
the issue of what is reasonable data security," Daniel Kaufman, the deputy
director for the FTC's Bureau of Consumer Protection, said in deposition
before an FTC administrative court. "The Commission has testified on it on
a number of occasions, and there's a lot of other publicly available
information on what constitutes reasonable data security."

The deposition involves a dispute between the FTC and LabMD, an
Atlanta-based medical laboratory that claims it was driven out of business
by an FTC data breach investigation.

The FTC last August filed a formal compliant against LabMD over data leaks
dating back to 2008 that exposed personal information on close to 10,000
people. In its complaint, the FTC charged LabMD with unfair trade practices
for not doing enough to protect data.

Over the past few years, the agency has filed similar complaints against
dozens of companies that suffered data breaches and has won settlements
from almost all of them.

LabMD, however, challenged the FTC complaint and accused the agency of
holding it to data security standards that do not exist officially at the
federal level. The only other company to challenge the FTC so far is
Wyndham Hotels, which has argued that the agency has no legal authority to
enforce data security controls on companies.

Both cases are widely seen as a test of the FTC's authority to punish
companies that suffer data breaches. Many have expressed concern that the
FTC may be overstepping its authority in going after breached firms.

Groups like the Chamber of Commerce, TechFreedom, the American Hotel and
Lodging Association, the National Federation of Independent Businesses and
the International Franchise Association have all filed briefs in support of
Wyndham, while government watchdog Cause of Action represents LabMD in the
dispute.

In response to the LabMD motion, the FTC argued that it was not obligated
to disclose the standards it uses to judge whether a company has adequate
controls or not. However, in a setback for the agency, the FTC's chief
administrative judge earlier this month held that the agency could indeed
be compelled to disclose the standards.

It's unclear how the administrative judge will view Kaufman's rationale for
the agency's actions.

In response to questions, Kaufman repeatedly noted that while the FTC may
not have spelled out what exactly it expects companies to do, the agency
has released enough information through speeches, blog posts, flyers and
other means for companies to get an idea of security best practices. For
example, though the agency has not specifically stated that it expects
companies to do penetration tests, it has made it clear that such tests are
a best practice.

"The Commission has, through all the materials I've mentioned, said that
companies need to use readily available measures to identify reasonably
known security risks, and one of the methods of doing that would be
penetration tests," he said. However, a determination of whether a company
erred in not doing a penetration test is typically determined on a
case-by-case basis, he said.

Kaufman said companies trying to determine the FTC data security
expectations could also easily get that information from previous
settlement agreements between the agency and breached entities.

A spokesman for Cause of Action was quick to point out that Kaufman's
testimony shows that the agency's enforcement actions are based on no
specific standard.

The fact that the FTC is pointing to things like blog posts, press
releases, website postings and flyers as sources is significant, he said.
"Essentially, the standard is a random conglomeration of "no clear
standard" and Kaufman repeatedly says it's a case-by-case basis. If
anything, it shows that a company would have no idea what the standard is"
he said in emailed comments.

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