Ricci Dipshan and C. Ryan Barber have an article on the importance and possible implications of LabMD’s challenge to the FTC’s application of their Section 5 authority when it comes to data security. Here’s a snippet:
The lack of tangible evidence in the case is hard to overstate. While LabMD, like the many other companies caught in FTC’s crosshairs, mishandled sensitive information, “nobody spoke up and said their medical information had been exposed. Nobody spoke up and said they were embarrassed by that or it violated their privacy—there was no evidence of medical identity theft,” says Julie O’Neill, a former FTC staff attorney who is currently of counsel at Morrison & Foerster’s privacy practice. The basis for the FTC’s action, she adds, is the belief that personal data “was exposed is an injury unto itself, even if nothing further comes of it.”
For many, the FTC’s legal argument can seem like a shot across the bow. By virtue of bringing an action against LabMD, the FTC is broadening its scope to regulate potential and intangible cybersecurity risk, regardless of material evidence of injury. And in doing so, the commission may be heading down a risky and far-reaching path.
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And while a court ruling could uphold the FTC’s unfairness standard, it may also find it an entirely inadequate legal tool for cybersecurity enforcement. “The focus on creating an intangible harm that results from a data breach or lax cybersecurity seems to point out in some ways that Section 5 isn’t a good fit for cybersecurity, and maybe that wasn’t what Congress intended for the FTC to be doing when it adopted the statute,” says Scott Delacourt, partner at Wiley Rein and chair of the firm’s FTC practice.
Read their entire article on LegalTechNews.
Frustrating that government agencies like the FTC are so vigorous in expanding their powers in the absence of a clear legislative directive to do so. At a minimum, if they are going to pursue businesses for violating regulations, it would be nice if they wrote the regulations first.