An Ill ‘Wynd’ Blowing But No Safe Harbor

One of the biggest regulatory issues facing U.S. businesses in 2016 is the impact of the European Court of Justice’s invalidation of Safe Harbor—the legal provision under which the cross-border transfer of personal data from the EU to the U.S. was deemed compliant with European privacy law.

The loss of Safe Harbor is a major headache for companies that do business overseas requiring the movement of data to and from the U.S. and Europe. It’s worth noting that such transfers can still take place while a new framework is being negotiated (assuming one is); however, individual companies must make provisions through a Model Contract clause or Binding Corporate Rules with each country’s data protection authority, or figure out workarounds that keep data from crossing international borders. 

While the loss of Safe Harbor raised a number of questions regarding the best approach for businesses in the interim, this new change will mean more work for international privacy and compliance lawyers.

At the same time that all eyes are on Safe Harbor, there is another significant regulatory concern that U.S. companies may be overlooking, and one with more ominous implications—fallout from the Federal Trade Commission’s win in its case against Wyndham Worldwide Corporation, the hotel and resort management company.

By ruling in favor of the FTC, which sued Wyndham under its regulatory authority for conducting unfair and deceptive business practices, the courts set a precedent that gives greater enforcement power to the FTC in cases where consumers’ personally identifiable information (PII) is compromised. The FTC’s action came after a series of data breaches that the commission argued affected Wyndham as a result of the company’s failure to provide proper protection and management of sensitive customer data. 

The court’s decision gives the FTC greater authority to punish companies that it finds are negligent in their responsibility to properly secure data. That means, despite what does or does not happen with pending data privacy or cybersecurity legislation at the state or federal level, we are likely to start seeing more action from the FTC against companies that the commission believes have not made sufficient investments in systems, policies, and processes for securing data. 

Most observers believe that the Wyndham decision will result in an emboldened FTC taking a more activist posture with regard to cybersecurity. If that’s the case—and it would be surprising if it didn’t happen—enterprises would be wise to try to get ahead of the curve where it comes to state-of-the-art data protection, including technology investments and governance policies. 

What does state-of-the-art for cybersecurity look like? What we know is that it looks different today than it did yesterday, and it will look different tomorrow. State-of-the-art means an ever-evolving program that is founded on the principles of the PPT model: People, Process and Technologies. PPT involves constant review and update of best practices weighed against changes to regulatory compliance. A good example of this model would be the programs established under the requirements of Massachusetts’ data protection law 201 CMR 17, which went beyond the California model of notification after a data breach to establishes a baseline for protecting that data in order to mitigate the chance of a data breach in the first place.

Thomas Jefferson said, “Eternal vigilance is the price of liberty.” Thanks to the decision in FTC vs. Wyndham, eternal vigilance is now the price of cybersecurity.