FTC and D-Link Settle Data Security Dispute
After protracted litigation, the Federal Trade Commission (FTC) entered into a proposed settlement with computer software manufacturer D-Link over charges that the company misrepresented the security of its wireless routers and Internet-connected cameras and failed to take reasonable software testing and remediation measures to protect the devices.
As we previously reported, part of the FTC’s 2017 complaint against D-Link was dismissed by the U.S. District Court for the Northern District of California on three counts, including an allegation that D-Link’s failure to take reasonable security steps was an unfair practice under Section 5 of the FTC Act. According to the court, the FTC did not identify instances where consumers’ financial, medical, or other sensitive personal information was accessed, exposed, or misused and therefore did not meet its burden under Section 5 – a significant ruling that could affect the FTC’s authority to bring future claims under Section 5 unless it establishes actual harm. However, the court allowed three of the FTC’s six claims to go forward, including counts involving D-Link’s alleged misrepresentations that its devices provided adequate data security and that its routers and IP cameras were secure against potential hacking.
Under the proposed Order, D-Link must develop, implement, and maintain a comprehensive software security program that is audited by an independent third-party assessor every two years for 10 years. The Order also bars D-Link from selling, distributing, or hosting its IP camera set-up wizard software on its website. The FTC reserved the right to approve a third-party compliance auditor, a measure the agency is now using more routinely in settlement orders.
The FTC filed the proposed settlement with the court on July 2, 2019, to be approved and signed by a district court judge.