Article - FTC enforcement against false Safe Harbor claims (February 2010)
In 2009 the US Federal Trade commission (FTC) took action against six organisations for falsely claiming they were members of the EU/US Safe Harbor.
The action followed publication of a report by Galexia which was critical of Safe Harbor’s operation. The FTC asked for public comments on their proposed settlements with the six companies, and received two. One of the comments was from the author of the report, Chris Connolly, who complained that the FTC was in danger of appearing to endorse the privacy protection offered by Directors Desk (one of the companies) when in practice they were clearly in breach of the Enforcement Principle of the Safe Harbor agreement. Directors Desk did not disclose who their dispute resolution provider was, and that it was American Arbitration Association, which charges about $4,000 just to file a complaint.
On 19 January the FTC made a final settlement of these matters. The FTC also responded to the two comments. It noted that nobody from the EU had complained and that there was no evidence of actual breaches.
Chris Connolly, a Board Member of the Australian Privacy Foundation, said:
1. This finalises some useful enforcement action by the FTC, and the six cases are probably a good warning shot to companies making false claims.
2. However, the FTC failed to address a clear case of actual non-compliance with the ‘substance’ of the Safe Harbor agreement.
3. Hundreds of Safe Harbor members belong to very expensive dispute resolution providers, costing thousands of dollars just to lodge a complaint, let alone resolve it. Apparently the FTC does not see this as an issue.
4. Hundreds of Safe Harbor members do not disclose the name of their dispute resolution provider in their privacy policies, despite this being a fundamental requirement of the Safe Harbor agreement. Apparently the FTC does not see this as an issue.
5. Although these six organisations have been taken to task for false claims, I calculate there are more than 300 organisations currently making a false claim of Safe Harbor membership. More action is required.
6. It appears that it would be helpful if someone from the EU actually stood up and complained.