With the end of the Brexit transition period rapidly approaching and the United Kingdom (UK) poised to become a “third country” after it leaves the European Union (EU), the UK and the EU have yet to reach any “deal” on how the transfer of personal data should be dealt with starting January 1, 2021. With the negotiations deep into their final phase, the advice from regulators, including the UK’s Information Commissioner’s Office (ICO), is that organisations should be taking steps to prepare for the UK becoming a third country (for the EU data protection regime) after Brexit.
Hot on the heels of the £20 million fine issued to British Airways, the Information Commissioner’s Office (“ICO“) has issued Marriott International Inc. (“Marriott“) with a long-awaited penalty notice for its failure to ensure appropriate security of the personal data it processed. The global hotel chain has been fined £18.4 million, which is a substantial reduction from the £99.2 million contemplated by the ICO’s notice of intention to fine. Unfortunately, the decision failed to give any detailed explanation for the reduction in the level of the fine from £99.2 million to £28 million. Although, a further 20% reduction to £22.4 million was designed to acknowledge Marriott’s cooperation, and a further £2 million reduction was to reflect the impact of the coronavirus pandemic. READ MORE
On November 11, 2020, the European Data Protection Board (EDPB) published its long-awaited guidance on what parties to international data transfers should be doing to perform such transfers in a manner compliant with the Regulation (EU) 2016/679 (the General Data Protection Regulation or GDPR) in light of the European Court of Justice’s (CJEU) decision in Case C-311/18 Data Protection Commissioner v Facebook Ireland and Maximillian Schrems (Schrems II).
Unfortunately, the draft guidelines provide no panacea for companies engaged in international data transfers of personal data from the EEA to third countries. Instead, organizations face 55 pages of guidance that provide few workable solutions for international data transferors—apart from a lengthy protocol for conducting risk assessments. READ MORE
When British Airways (“BA”) suffered a significant personal data breach in September 2018, just months after the coming into force of the EU General Data Protection Regulation (“GDPR”), all eyes were on the UK’s Information Commissioner’s Office (“ICO”). Would the ICO use the UK’s flagship airline as a “poster child” for post GDPR enforcement? Was this the moment that much-hyped fines of up to 4% of global turnover come to pass? READ MORE
The legal risks associated with cybersecurity continue to increase, as regulators and plaintiffs’ lawyers become more and more aggressive in bringing cybersecurity claims under existing laws and as legislatures continue to enact new ones. A key element of many of the cybersecurity claims brought under these laws is a requirement to show that the company in question failed to implement “reasonable” security for personal information. California’s new Consumer Privacy Act (“CCPA”), for instance, allows consumers to sue businesses for statutory damages when specified types of personal information are subject to unauthorized access and exfiltration, theft, or disclosure because of a failure to implement and maintain “reasonable” security measures and the business has not cured the alleged violation within the CCPA’s pre-suit period. Cal. Civ. Code § 1798.150. Even though consumers often suffer no injury in a data beach, the CCPA provides for statutory damages of $100–$750 per consumer per incident. READ MORE
In September 2020, the UK government published its National Data Strategy (“NDS”), aiming to use data to boost the UK economy and to “unlock the power of data for the UK,” particularly in light of Brexit. The NDS is intended to set out the UK’s government focus on data, following the recent announcement that responsibility for government use of data will move from the Department for Digital Culture Media and Sport to the Cabinet Office. READ MORE
In one of the world’s first test cases regarding the legality of the use of automated facial recognition and biometric technology, on 11 August 2020 the English Court of Appeal handed down judgment in R (Bridges) v CC South Wales. The court found that the use of this technology by the South Wales Police Force violated privacy, equality and data protection laws. READ MORE
Earlier this month, the U.S. Supreme Court agreed to hear a pair of cases that provide it with the opportunity to severely restrict the Federal Trade Commission’s (“FTC’s”) authority to obtain equitable money relief in consumer protection enforcement actions, including privacy and cybersecurity matters. Under Section 13(b) of the FTC Act, in certain circumstances the FTC is empowered to bring actions in federal court to seek temporary restraining orders and injunctions for violations of the Act. In two consolidated cases, FTC v. Credit Bureau Center, LLC and AMG Capital Management, LLC v. FTC, the Supreme Court will now consider whether, as the FTC claims, this provision also authorizes the agency to seek equitable money relief for such violations, even though the provision makes no mention of money relief. The decision will have broad implications because the FTC has relied on Section 13(b) to seek monetary relief in consumer protection enforcement actions, including privacy and cybersecurity matters. A ruling against the FTC could substantially alter the FTC’s approach to privacy and cybersecurity enforcement.
The FTC’s privacy and cybersecurity enforcement actions typically rely on Section 5 of the FTC Act, which prohibits unfair or deceptive trade practices. The FTC takes the position that a failure to implement “reasonable” cybersecurity or privacy practices can constitute an “unfair” practice, and that making false or misleading statements about such practices can be a “deceptive” trade practice under the statute.
The FTC can enforce Section 5 in two ways. First, it can rely on its traditional administrative enforcement authority, which allows the FTC to initiate an administrative proceeding to issue an order to “cease and desist” violations of Section 5, but only provides for monetary relief in limited circumstances. Second, in certain situations the FTC can sue directly in federal court under Section 13(b) of the FTC Act. Although Section 13(b) authorizes only “injunctions,” the FTC often brings cases under this section in federal court seeking monetary relief under equitable doctrines such as restitution, disgorgement and rescission of contracts.
Until recently, courts universally accepted the FTC’s expansive view that its authority under Section 13(b) to obtain “injunctions” enables it to seek equitable monetary relief. But that has begun to change. In Credit Bureau, the Seventh Circuit rejected the FTC’s position that Section 13(b) authorizes monetary relief on the ground that an implied equitable monetary remedy would be incompatible with the FTC Act’s express remedial scheme. Most notably, the court observed that the FTC Act has two detailed remedial provisions expressly authorizing equitable money relief if the FTC follows certain procedures. The FTC’s broad reading of Section 13(b) would allow the agency to circumvent these conditions on obtaining equitable money relief, contrary to the intent of Congress. And in AMG Capital Management, although the Ninth Circuit considered itself bound to follow its prior precedent allowing the FTC to obtain money relief under Section 13(b), two of the three panel members joined a special concurrence arguing that this position is “no longer tenable.” And a decision from the Third Circuit last year, while not addressing whether the FTC is barred from pursuing money relief under Section 13(b), held that to pursue such relief the FTC must, at a minimum, allege facts plausibly suggesting that the company “is violating, or is about to violate,” the law.
If the Supreme Court restricts or eliminates the FTC’s pursuit of equitable money relief under Section 13(b), its decision would represent a significant setback for the FTC’s recent attempts to expand its remedial authority in privacy and cybersecurity cases, among others. In June 2018, medical laboratory LabMD obtained the first-ever court decision overturning an FTC cybersecurity enforcement action, convincing the Eleventh Circuit that an FTC cease-and-desist order imposing injunctive relief requiring LabMD to implement “reasonable” data security was impermissibly vague. (The team directing that effort – led by Doug Meal and Michelle Visser – joined Orrick in January 2019.) In the wake of LabMD, the FTC’s new Chairman, Joseph Simons, stated that he was “very nervous” that the agency lacked the remedial authority it needed to deter allegedly insufficient data security practices and that, among other things, the FTC was exploring whether it has additional untapped authority it could use in this space. The FTC has followed through on that promise in the ensuing years, pursuing a wide range of additional remedies, including equitable money relief. An adverse ruling by the Supreme Court could strike a severe blow to the FTC’s efforts on this front.
Such a ruling is entirely possible. Just last month in SEC v. Liu, the Supreme Court recognized limits on the disgorgement power of the Securities and Exchange Commission, determining that it is restricted to situations where the remedy does not exceed a wrongdoer’s net profits and is awarded for victims. However, unlike the FTC Act, the SEC Act specifically authorizes the SEC to seek “equitable relief.” Therefore, the consolidated AMG and Credit Bureau cases afford the Supreme Court an opportunity to recognize even greater restrictions on the FTC’s authority to obtain equitable money relief under Section 13(b) – or, as the Seventh Circuit did in Credit Bureau, to reject such authority altogether.
While in the short term such a ruling may reduce the monetary risks of FTC privacy and cybersecurity enforcement for companies collecting personal information, it could serve as a catalyst for a legislative proposal that would provide the FTC significant new authority to police privacy and security violations and assess civil penalties.
To discuss these cases in more detail, or for advice on the FTC’s privacy and cybersecurity enforcement program more generally, please feel free to contact any member of our privacy & cybersecurity team, which has immense experience in this area.
On January 21, 2019, the CNIL (the French data protection authority) issued a fine of €50 million to Google under the General Data Protection Regulation (the “GDPR”) for its failure to (1) provide notice in an easily accessible form, using clear language, when users configured their Android mobile device, and (2) obtain users’ consent to process personal data for ad personalization purposes. The CNIL’s enforcement action and resulting fine arose out of actions filed by two not-for-profit associations, None of Your Business and La Quadrature du Net. The fine was the first significant fine imposed by the CNIL under the GDPR and remains one of the highest fines to date. In determining the amount of the fine, the CNIL considered the fact that the violations related to essential principles under the GDPR (transparency and consent), the violations were continuing, the importance of the Android operating system in France, and the fact that the privacy notice presented to users covered a number of processing operations. Google appealed the decision. READ MORE
On April 7, 2020, the French Data Protection Authority (the CNIL) published on its website a Q&A on the right to de-listing. The right to de-listing enables a data subject to request from a search engine to remove one or several results provided when a search request is carried out using the data subject’s name and surname.
The timing of this publication is interesting as it took place a few days after the decision of the French Highest Administrative Court (the Conseil d’Etat) on the so-called Google case.