LifeLock forced to pay $100 million FTC fine

23 Dec 2015 | Author: | No comments yet »

Business Watch.

LifeLock will pay $100 million to settle a Federal Trade Commission lawsuit that accused the identity-theft protection company of deceiving customers and of violating a 2010 court order. The settlement, which represents the largest of its kind obtained by the FTC as part of an enforcement action, was announced two months ago, when LifeLock told shareholders it was putting aside $120 million. The jury found that Cox helped contribute to the infringement of BMG copyrights by its Internet subscribers and that Cox’s conduct was “willful.” “We are unhappy with the decision, will review the ruling in detail and are considering our options, including appeal,” said Todd Smith, a spokesman for Cox.

The FTC accused LifeLock in July of failing to protect customers’ personal information, falsely advertising its level of security, failing to provide alerts as promised and not maintaining records. Under terms of the agreement, $68 million will go to customers who filed a class-action lawsuit against the company contending they were misled about the company’s overall security and safeguards. The FTC claimed that LifeLock violated a judge’s order requiring that it properly safeguard sensitive personal data like Social Security, credit card, and bank account numbers.

LifeLock officials said the amount is “sufficient to fully fund the consumer redress.” The remaining $32 million will be used to pay back consumers who filed complaints with attorneys general in 35 states. In court papers, Cox had said it had no “actual” knowledge of any specific infringements and that the plaintiffs had no evidence of Cox account holders personally infringing through their Cox accounts.

Additionally, the regulators alleged that LifeLock lied to consumers that it kept consumer data secure in a similar way to how financial institutions lock up data. The company charges $9.99 per month to monitor a customers’ accounts to get an early warning of identity theft and to help them clean up the mess when identity theft occurs. Cox also had argued it was shielded from liability by a 1998 law that creates a so-called “safe harbor” from copyright claims for Internet providers so long as they take certain steps, such as investigating claims of illegal downloads by users. The agency said that LifeLock falsely claimed in advertisements that it had security systems that were as strong as those used by financial institutions.

The lawsuit targets the practice of downloading music via so-called torrent services, through which a downloader retrieves small bits of data from multiple peers,​with that data then being compiled into a complete file on the downloader’s hard drive. At that time, the chairman of the agency, Jon Leibowitz, said LifeLock’s promises to guard data from identity thieves were woefully inadequate and its protection “actually provided enough holes that you could drive a truck through it.” LifeLock, based in Tempe, Ariz., agreed then to a $12 million fine.

According to the 2010 FTC announcement, one of the ways LifeLock would advertise its services was “by displaying the CEO’s Social Security number on the side of a truck.” But a 2010 article in the Phoenix New Times said that LifeLock’s CEO Todd Davis had his identity stolen “at least 13 times since 2007.” Maureen Ohlhausen, the sole Republican on the panel, said in her dissent that she was unconvinced that LifeLock had fallen short in protecting its customers data. Commissioner Maureen Ohlhausen wrote in a dissent that it wasn’t clear if LifeLock had violated the 2010 settlement. “The record lacks clear and convincing evidence that LifeLock failed to establish and maintain a comprehensive information security program designed to protect the security, confidentiality, and integrity of consumers’ personal information,” Ohlhausen wrote. “This settlement demonstrates the Commission’s commitment to enforcing the orders it has in place against companies, including orders requiring reasonable security for consumer data,” FTC Chairwoman Edith Ramirez said in a statement. “The fact that consumers paid Lifelock for help in protecting their sensitive personal information makes the charges in this case particularly troubling.” In the settlement announced Thursday, the FTC said LifeLock also didn’t properly establish internal policies to protect consumer data from cyberattacks or leaks.

The Wall Street Journal reported in October that the software and consulting firm, which Dell acquired in 2011, filed papers for the IPO over the summer and that a roadshow could take place in the winter. SecureWorks said in its Form S-1 that it posted an $18.5 million loss for the quarter ended Oct. 30, compared with a loss of $8.8 million a year earlier. SecureWorks sells managed-security services, online tools that companies can use to keep tabs on their network activity and prevent hackers from breaking into their computer systems. Under the JOBS Act, companies with revenue below $1 billion are allowed to keep filings confidential until they are ready to market shares to potential investors.

Chief Executive John Standley pointed to revenue and same-store sales growth as well as “positive, significant contributions from our new pharmacy services segment.” He said the company strengthened its retail health-care offering by converting additional stores to its wellness format. The chain, like rivals, has adjusted its offerings to broaden its business model as the pharmacy and drugstore industry expands into the health and wellness sector. Rite Aid has worked to expand its RediClinics and remodeled 96 wellness stores, which offer organic food and natural personal-care options and feature consultation rooms for discussions with pharmacists.

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