On May 20, 2022, the Federal Trade Commission’s Team CTO and the Division of Privacy and Identity Protection published a blog post entitled, “Security Beyond Prevention: The Importance of Effective Breach Disclosures.” In the post, the FTC takes the position that in some cases there may be a de facto data breach notification requirement, despite there currently being no section of the Federal Trade Commission Act or implementing regulation imposing an express, broadly applicable data breach notification requirement. Businesses should nonetheless take this de facto rule into account as part of their incident response plans.

The post stresses the importance of strong incident detection and response processes, noting they are vital to maintaining reasonable security.  The notification component can prevent and minimize consumer harm from breaches because, among other things, it can spur consumers to take actions to mitigate harm resulting from the breach. According to the FTC, failure to maintain such practices could indicate a lack of competition in the marketplace. Notably, the post states:

Regardless of whether a breach notification law applies, a breached entity that fails to disclose information to help parties mitigate reasonably foreseeable harm may violate Section 5 of the FTC Act.

The American Recovery and Reinvestment Act of 2009 directed the FTC to establish rules to require notification to consumers when the security of their individually identifiable health information has been breached. However, those rules apply only to vendors of personal health records and related entities, although a recent FTC policy statement clarified the application of the rule. In support of the blog post’s more broadly applicable de facto requirement, the FTC discussed some recent enforcement actions.

The post referred to the recent settlement with an online retailer that allegedly failed to timely notify consumers and other relevant parties after data breaches, thereby preventing parties from taking measures to mitigate harm.  The FTC viewed this as an unfair trade practice. Looking to other enforcement actions as examples, the post explained that deceptive statements can hinder consumers from taking critical actions to mitigate foreseeable harms like identity theft, loss of sensitive data, or financial impacts. Looking at these cases together, the post concluded that:

companies have legal obligations with respect to disclosing breaches, and that these disclosures should be accurate and timely.

As any victim of a data incident or experienced breach counsel knows, a critical part of just about any security incident is determining whether there has been a breach and whether notification is required. For an incident affecting individuals in a significant number of countries and/or states, navigating the various data breach statutes and regulations is challenging. According to the FTC’s post, even if that process leads to the conclusion that notification is not required under state law, for example, the FTC’s de facto rule may apply to avoid an allegation of unfair or deceptive trade practice.

Business, therefore, should review their incident response plans in light of this informal guidance.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Joseph J. Lazzarotti Joseph J. Lazzarotti

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP)…

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with the International Association of Privacy Professionals. Trained as an employee benefits lawyer, focused on compliance, Joe also is a member of the firm’s Employee Benefits practice group.

In short, his practice focuses on the matrix of laws governing the privacy, security, and management of data, as well as the impact and regulation of social media. He also counsels companies on compliance, fiduciary, taxation, and administrative matters with respect to employee benefit plans.

Privacy and cybersecurity experience – Joe counsels multinational, national and regional companies in all industries on the broad array of laws, regulations, best practices, and preventive safeguards. The following are examples of areas of focus in his practice:

  • Advising health care providers, business associates, and group health plan sponsors concerning HIPAA/HITECH compliance, including risk assessments, policies and procedures, incident response plan development, vendor assessment and management programs, and training.
  • Coached hundreds of companies through the investigation, remediation, notification, and overall response to data breaches of all kinds – PHI, PII, payment card, etc.
  • Helping organizations address questions about the application, implementation, and overall compliance with European Union’s General Data Protection Regulation (GDPR) and, in particular, its implications in the U.S., together with preparing for the California Consumer Privacy Act.
  • Working with organizations to develop and implement video, audio, and data-driven monitoring and surveillance programs. For instance, in the transportation and related industries, Joe has worked with numerous clients on fleet management programs involving the use of telematics, dash-cams, event data recorders (EDR), and related technologies. He also has advised many clients in the use of biometrics including with regard to consent, data security, and retention issues under BIPA and other laws.
  • Assisting clients with growing state data security mandates to safeguard personal information, including steering clients through detailed risk assessments and converting those assessments into practical “best practice” risk management solutions, including written information security programs (WISPs). Related work includes compliance advice concerning FTC Act, Regulation S-P, GLBA, and New York Reg. 500.
  • Advising clients about best practices for electronic communications, including in social media, as well as when communicating under a “bring your own device” (BYOD) or “company owned personally enabled device” (COPE) environment.
  • Conducting various levels of privacy and data security training for executives and employees
  • Supports organizations through mergers, acquisitions, and reorganizations with regard to the handling of employee and customer data, and the safeguarding of that data during the transaction.
  • Representing organizations in matters involving inquiries into privacy and data security compliance before federal and state agencies including the HHS Office of Civil Rights, Federal Trade Commission, and various state Attorneys General.

Benefits counseling experience – Joe’s work in the benefits counseling area covers many areas of employee benefits law. Below are some examples of that work:

  • As part of the Firm’s Health Care Reform Team, he advises employers and plan sponsors regarding the establishment, administration and operation of fully insured and self-funded health and welfare plans to comply with ERISA, IRC, ACA/PPACA, HIPAA, COBRA, ADA, GINA, and other related laws.
  • Guiding clients through the selection of plan service providers, along with negotiating service agreements with vendors to address plan compliance and operations, while leveraging data security experience to ensure plan data is safeguarded.
  • Counsels plan sponsors on day-to-day compliance and administrative issues affecting plans.
  • Assists in the design and drafting of benefit plan documents, including severance and fringe benefit plans.
  • Advises plan sponsors concerning employee benefit plan operation, administration and correcting errors in operation.

Joe speaks and writes regularly on current employee benefits and data privacy and cybersecurity topics and his work has been published in leading business and legal journals and media outlets, such as The Washington Post, Inside Counsel, Bloomberg, The National Law Journal, Financial Times, Business Insurance, HR Magazine and NPR, as well as the ABA Journal, The American Lawyer, Law360, Bender’s Labor and Employment Bulletin, the Australian Privacy Law Bulletin and the Privacy, and Data Security Law Journal.

Joe served as a judicial law clerk for the Honorable Laura Denvir Stith on the Missouri Court of Appeals.