Recent FTC Enforcement Activity and Congressional Testimony

On June 16, 2005, the Federal Trade Commission announced that BJ’s Wholesale Club, Inc. ("BJ’s") agreed to settle charges that "its failure to take appropriate security measures to protect the sensitive information of thousands of its customers was an unfair practice" that violated Section 5 of the FTC Act.1 On the same day, FTC Chairman Deborah Platt Majoras testified before the Senate Commerce Committee on the topic of data breaches and identity theft. In her testimony, Chairman Majoras stated the Commission’s view that Section 5 requires all companies "holding sensitive data to have in place procedures to secure it if its failure to do so is likely to cause substantial consumer injury."2 Chairman Majoras also urged Congress to consider legislation effectively extending the Commission’s Safeguards Rule (currently applicable only to "financial institutions") to all companies with access to sensitive customer data.