Court Case To Decide Future Of FTC Regulation Of Firm Cyber Security Systems

America, in the 1800s, was filled with trusts. “Trusts” referred to giant businesses that controlled the lay of the land.

Think about the major economic drivers in the Wild West—railroads, oil steel—or other commodities—sugar, for example—and you’ll likely find a trust behind it. U.S. Steel and Standard Oil once ruled the supply, controlled the price, and generally monopolized the market in American in the nineteenth century.

The rich seemed only to get richer, which is why President Theodore Roosevelt sought to break up these trusts through legal action.

Teddy, with the help of Congress, soon passed The Sherman Act in 1890, which became the country’s oldest anti-trust law. In 1914, another anti-trust bill, the Clayton Act, was passed by Congress under President Woodrow Wilson. With it came the Federal Trade Commission, or FTC.

The FTC was an agency tasked to enforce anti-trust laws and regulate and oversee business practice to ensure fair and equitable competition.

More recently, the FTC started to work in conjunction with the Department of Justice to promote consumer protection and anti-competitive business practice.

The FTC’s professed mission, specifically, is to “prevent business practices that are anticompetitive or deceptive or unfair to consumers; to enhance informed consumer choice and public understanding of the competitive process; and to accomplish this without unduly burdening legitimate business activity.”

The key players in trust regulation in Progressivist America could never envision the lack of trust consumers face today with the evolution of e-commerce. Today, the FTC’s mission of protection is being challenged on its home turf—in court.

Adding to the U.S.’s long history of anti-trust regulation, a case pending in the federal court for the District of New Jersey will decide whether or not the FTC has the right to oversee and regulate data security services provided to consumers by private firms.

Hotel conglomerate, Wyndham Worldwide Corporation, is challenging the authority of the FTC to enforce action against Wyndham and several of its subsidiary companies. The FTC’s action alleges Wyndham failed to secure the data and privacy of its customer accounts after a hacking incident claimed more than $10.6 million from Wyndham’s customers via fraudulent charges and the loss of information belonging to 500,000 individuals, according to the Westlaw Insider.

Deciding whether or not the FTC’s authority extends to oversight and regulation of the operations and other practices of private companies will definitely change the way firms can and will business. Audits to ensure firms have incorporated sufficient security measures are on the horizon, and fines for insufficient security measures would, then, be imminent.

And, although consumer protection and privacy concerns should be considered paramount to businesses, to what extent should the government be privy to the same concerns and information? Also, to what extent are businesses liable for implementing state-of-the-art cyber-protection software in the eyes of the law?

These days, breaches of online security—from cloud computing espionage to electronic spam to broken passwords (despite the alphanumeric complexity)—are common place.

The Wyndham case should certainly prompt law firms and the clients they represent to tighten those security belts before driving down the information superhighway—not just because it’s good sense and safe, but because it may soon be the law.

In our modern world, the Wyndham case serves as a gentle reminder for firms to be wiser about their computer security hardware and software, but also for governments to implement constitutional measures to find the source of this malware without violating the same privacy they seek to protect.

For more information about how to protect your firm, read “Cyber Attacks: Why Your Firm Is At Risk & How To Prevent Them.”

-WB

Read more about the history of the FTC in a fact sheet, here.

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