In Federal Trade Commission v. Wyndham Worldwide, No. 14-3514 (3d Cir. August 24, 2015), the U.S. Court of Appeals for the Third Circuit affirmed the U.S. District Court for the District of New Jersey’s denial of Wyndham’s motion to dismiss the Federal Trade Commission’s complaint under the Federal Trade Commission Act, which prohibits “unfair or deceptive acts or practices in or affecting commerce.” The “unfair or deceptive acts” of which Wyndham was accused involved cybersecurity practices so lax as to allow for repeated, successful hacks that allowed the intruders access to clients’ credit card and other personal information. Although the FTC had been turning its attention to cybersecurity issues since 2005, the Third Circuit’s opinion represents the strongest judicial acceptance that the FTC Act can be used to allow the FTC to look at cybersecurity practices as “unfair or deceptive acts.” What is perhaps most interesting about the opinion is what it assumes: As cybersecurity becomes just another trade practice, the chasm between “normal stuff” and “computer stuff” grows more narrow and shallow.
The Hacks
According to the complaint, on three occasions in 2008 and 2009, hackers successfully accessed Wyndham’s computer systems, stealing the personal and financial information of hundreds of thousands of consumers, which led to over $10.6 million in fraudulent charges. The FTC’s complaint was that Wyndham’s conduct was an unfair practice and that its privacy policy was deceptive. After the district court denied Wyndham’s motion to dismiss, the Third Circuit granted interlocutory appeal on two issues: whether the FTC has authority to regulate cybersecurity under the unfairness prong of Section 45(a), and, if so, whether Wyndham had fair notice its specific cybersecurity practices could fall short of that provision. It affirmed on both grounds.
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