The Federal Trade Commission settled a lawsuit against ValueClick today for making email and advertising claims that were deceptive and misleading. But as with many other legal documents, the real impact of the decision might be in the fine print.
At $2.9 million, the FTC's settlement with ValueClick is larger than any previous lawsuit alleging violation of the CAN-SPAM Act. ValueClick repeatedly promised customers "free" items without disclosing the costs and obligations required to receive them, the Commission said.
In a nutshell, the decision means that enterprises could be found negligent for promising to protect user data but subsequently failing to implement the security precautions required to meet those promises. If you promise good security and then fail to provide it, it could weigh against you in court, the decision says.
"The FTC ruling sends a powerful message to the business community," says Scott Kamber, a partner at Kamber Edelson LLC, a legal firm that specializes in cyber security law.
"In the past, companies that failed to protect customer data have argued that they are immune from prosecution unless consumers can directly prove that they suffered harm from the breach of their personal information," Kamber explains. "Given that hackers are generally pretty good at covering their tracks, this argument -- if accepted -- would mean that few companies would have to account for their negligence."
With the ValueClick settlement, Kamber says, "the FTC has made clear that common sense will prevail over technical legal arguments, at least when it comes to governmental sanctions. We believe the FTC's ruling will help with the current cases we are prosecuting, as well as future ones we are contemplating."
"The FTC charged that ValueClick [and subsidiaries] Hi-Speed Media and E-Babylon misrepresented that they secured customers sensitive financial information consistent with industry standards," according to a statement by the Commission. "The FTC alleged the companies published online privacy policies claiming they encrypted customer information, but either failed to encrypt the information at all or used a non-standard and insecure form of encryption...
"The agency also charged that several of the companies e-commerce Web sites were vulnerable to SQL injection, a commonly known form of hacker attack, contrary to claims that the companies implemented reasonable security measures."
The settlement bars ValueClick and its subsidiaries from making misrepresentations about the use of encryption or other electronic measures to protect consumers information, and about the extent to which they protect personal information. The order also requires the companies to establish and maintain a comprehensive security program, and obtain independent third-party assessments of their programs for 20 years.
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