From: The National Law Review
Alexander W. Major Brian D. Weimer | Sheppard, Mullin, Richter & Hampton LLP
The FCC recently slid up its chair to the fiscal feast that is cyber security and data breach regulation and took a hefty piece of the pie. In late October the FCC announced that it charged a record $10 million fine against two telecommunication companies after the telecoms reportedly posted the private information of nearly 300,000 people in a manner making the people eligible for identity theft. Taking a cue from the Federal Trade Commission (“FTC”), the FCC action was not based on any new set of concrete regulations or laws established to give organizations a minimum bar for data protection, but rather on existing FCC powers established under the Communications Act of 1934. The action serves as good warning not only to communications providers that the FCC will be examining data breaches and, more expressly, data storage issues, but also that in the absence of clear cybersecurity regulations, federal agencies will take an expansive view of their existing authority to address cybersecurity-related incidents involving companies subject to their jurisdiction.
For those unfamiliar with similar FTC actions, over the course of the past several years the FTC has asserted its authority to regulate the handling of consumers’ sensitive personal information under the “unfair or deceptive acts or practices” prong of Section 5 of the Federal Trade Commission Act, the basic consumer protection statute enforced by the Commission.. Under Section 5, an act or practice is unfair if “it causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or competition.” With over fifty of such actions under its belt, the FTC has taken the de facto lead on addressing cybersecurity data breaches. That authority has even been confirmed by the U.S. District Court of New Jersey in an action against Wyndham Hotels, a decision that is currently on appeal to the Third Circuit.
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