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LabMD v. Federal Trade Commission | 894 F.3d 1221 (2018)
The Federal Trade Commission is charged with protecting consumers. Does this authority include policing private data-security programs to ensure companies are protecting consumer information? Can the commission order a company to do a better job generally of securing consumer data? The Eleventh Circuit addressed these questions in Lab M D, Incorporated versus Federal Trade Commission.
Lab M D, Incorporated conducted cancer tests. An employee installed file-sharing software called Lime Wire on a company computer, which gave other Lime Wire users potential access to patient files on that computer.
Tiversa Holding Corporation sold data-protection services. Tiversa obtained a file containing information about almost ten thousand of the lab’s patients. Tiversa showed the file to the lab, claiming it had used Lime Wire to copy the file from the lab’s computer and offering to sell protection services to the lab. The lab declined.
Tiversa turned the file over to the Federal Trade Commission. The commission investigated the lab’s data-security practices and filed an administrative complaint against the lab, alleging that its data-security program was inadequate. The commission claimed that the inadequate program qualified as an unfair act or practice that harmed consumers and therefore violated the Federal Trade Commission Act section Five A.
The administrative-law judge dismissed the complaint. The commission appealed the dismissal to itself.
The commission reversed the dismissal, finding that the lab had engaged in an unfair act or practice and entering a cease-and-desist order. The order required the lab to implement a new data-security program that was, quote, reasonably designed to protect the security, confidentiality, and integrity, unquote, of consumer information. The order contained some general guidelines about how to do this, such as using additional protection for extra-sensitive information. But the order didn’t contain any specific standards or requirements for what was considered a reasonable design. The lab appealed the commission’s order to the Eleventh Circuit.
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