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Keeping an Eye on the Federal Trade Commission's View on Data Security Breaches by Companies
Editor's Note: In recent weeks, the entertainment industry has been rattled by the hacking and public release beginning in November of a massive amount of internal documents and e-mails from Sony Pictures Entertainment. By mid-December, the incident had already generated several class action lawsuits in California by current and former Sony employees and production associates who allege negligence and violation of state statutes. But the frequent hacking of consumer information is a liability issue that entertainment companies, from ticketing entities to content sellers, must be prepared for, too.
The following article examines a case in which the Federal Trade Commission (FTC) has sued the Wyndham hotel chain by alleging that the breach of the resort company's customers' credit card account numbers was an unfair trade practice. This article also discusses an earlier data-breach action by the FTC against the former Tower Records.
In April 2014, Judge Esther Salas of the U.S. District Court for the District of New Jersey decided that that the Federal Trade Commission could pursue a claim that a hotel company's failure to have adequate data security measures is an unfair trade practice. Federal Trade Commission v. Wyndham Worldwide Corp., 10 F.Supp. 3d 602 (D.N.J. 2014). In its recent brief addressing Wyndham's appeal to the U.S. Court of Appeals for the Third Circuit, the FTC has made clear that it is not backing down. The agency believes that data security is a basic responsibility of any company that accepts consumer personal information, and that savvy companies should heed Wyndham's lessons.
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