is establishing these data protection and cybersecurity protocols. Yes, we want to fulfill these requirements to keep the federal government at bay, but I would argue that the main focus should be to prevent data breaches, ransomware attacks, or other cybersecurity incidents! Think about the different forms of damage to your organization that could arise as a result of a data breach or ransomware attack: • Reputational damage: Dealerships are pillars in their community, and word of a data breach will spread quickly. Additionally, vendors may be wary about working with you in the future. • Data breach mitigation: Depending on the level of your cybersecurity coverage from your insurance company (or lack thereof), you could be paying out of pocket for forensic professionals to “stem the bleeding,” so to speak, and try and recover what you can. • Dealership downtime: You can bet that your dealership will suffer significant delays as you try to survey the extent of the breach and work through the mitigation efforts. • Data recovery: If it was a ransomware attack that resulted in the loss of employee, customer, and dealership information, the road back to where you started will be a long one. Think of all the information that existed prior to the attack that you will now need to rebuild from scratch. • Consumer protection efforts: Depending on the extent of the breach, you may be legally responsible for the cost of providing identity theft protection measures to all of the consumers who suffered a release of their information. • State and federal penalties: Suffering a breach does not earn you any pity from the government. State and federal enforcement officials will come in shortly thereafter to “pour salt in the wound” in the form of heavy fines and penalties. • Class action lawsuits: Always a significant concern for dealers is a class action lawsuit by harmed individuals who had their information either stolen or released. FTC Using Its Broad Authority Under Section 5 for Cybersecurity Concerns Section 5 of the FTC Act prohibits “unfair or deceptive business practices in or affecting commerce.” Given that this clause has been around since 1914, it is safe to say that the authors did not consider cybersecurity during the time that it was drafted. Nevertheless, as a Nobel Prize laureate once said, “the times they are a-changin’” and the FTC has wielded this section as a sword to strike down businesses who have displayed poor cybersecurity practices. Defining false data security or privacy representations under both “unfair” and “deceptive” terms of art since 2002, the FTC has negotiated consent agreements since then with most businesses as many of them never wanted to test its authority over regulating cybersecurity. It was not until 2012 when a private company that had been the victim of a cyber attack three times moved to dismiss the FTC’s lawsuit, stating that it had no authority rather than enter into a settlement. Going all the way up to the Third Circuit, the court affirmed that the FTC does, in fact have the authority to regulate cybersecurity based on factors I won’t bore you with here. Since then, there have been no direct challenges to the FTC’s authority over a business’s cybersecurity practices under this broad Section 5, and the FTC continues to use it repeatedly and effectively: • Consent order with an education technology provider for alleged poor data security practices that exposed sensitive information about millions of customers and employees. Specifically, it did not require employees to use MFA, stored information insecurely, and failed to provide adequate security training to employees. — January 2023 • Consent order with an online alcohol marketplace (and its CEO, personally) over allegations that its security failures led to a data breach exposing the personal information of approximately 2.5M consumers. Specifically, it did not require employees to use MFA, did not limit employees’ access to personal data, failed to monitor security threats, and stored information insecurely. — January 2023 • Consent order with an online customized merchandise platform that failed to implement reasonable security measures and failed to adequately respond to several security breaches. Specifically, it stored SSNs and passwords in readable text, did not require employees to use MFA, retained data longer than was reasonably necessary, and covered up major data breaches. — June 2022 With all of the recent activity by the FTC, we believe that automotive retail is squarely in the sights of the new Commissioners. It is imperative that dealers continue in their efforts to expeditiously comply with all the new requirements of the Rule to achieve full compliance by the new deadline. For more information, please visit www.complyauto.com or email at info@ComplyAuto.com. This article should be used as a compliance aid only and though its accuracy has been made a priority, it is not a substitute for professional legal advice. Each dealer should rely on their own expertise when using it. DEALER’S CHOICE 10
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