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House panel investigating FTC data breach enforcement

Lawyers say the House Oversight Committee is investigating a P-to-P security vendor tied to the agency

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A U.S. House of Representatives committee has reportedly launched an investigation into the Federal Trade Commission's use of information from a peer-to-peer security vendor to bring a data breach complaint against a medical testing laboratory.

On Friday, a lawyer representing a former employee of P-to-P security vendor Tiversa told an FTC administrative law judge that the U.S. House Oversight Committee was investigating the company. In a trial before the FTC judge, Atlanta medical lab LabMD is challenging the FTC's authority to enforce data security standards, even though the agency has brought dozens of data breach complaints against companies dating back more than a decade.

Lawyer William Burck, representing the former Tiversa employee, didn't offer details of the House Oversight investigation during the public portion of the trial Friday, according to a trial transcript provided by LabMD.

Lawyers didn't discuss details of the House investigation with FTC Administrative Law Judge Michael Chappell in open session, but Jarrod Shaw, representing Tiversa CEO Robert Boback, said the company first learned of the investigation Friday morning.

After Shaw asked for a delay in the administrative trial, Chappell recessed until June 12. The trial began earlier this month.

A representative of Representative Darrell Issa, chairman of the House Oversight Committee, didn't immediately return a message seeking details on the investigation. A representative of Tiversa also didn't return a message.

An FTC spokesman said he couldn't comment on the report of an Oversight Committee investigation.

Tiversa found a LabMD spreadsheet containing sensitive personal information from more than 9,000 consumers on a P-to-P network in 2008, according to an FTC complaint filed last August. The information on the file-sharing network included names, Social Security numbers, dates of birth, health insurance provider information, and standardized medical treatment codes, the FTC said.

LabMD has argued that the FTC lacks the authority to bring data breach complaints and has given companies little data security guidance to follow.

LabMD's challenge could determine whether the FTC has the authority to bring data breach complaints against U.S. companies. Since the early 2000s, the FTC has reached nearly 50 data breach settlements with companies, including Twitter, Microsoft, data broker ChoicePoint, and retailers BJ's Wholesale Club and TJX.

The FTC filed a data breach complaint against LabMD in August 2013, alleging that the company, through P-to-P software installed on employee's computer, had lost customer billing information.

LabMD has disputed many of the FTC allegations, with the company saying it shared some information as part of a research project involving Tiversa. The P-to-P security vendor tried to use its possession of a LabMD spreadsheet to convince the medical lab to buy its security services, LabMD has alleged.

The FTC, in bringing a complaint against LabMD acted in a way that was "arbitrary, capricious" and an abuse of discretion, lawyers for the lab wrote in September. The agency has acted "contrary to constitutional right" and "in excess of statutory jurisdiction," LabMD's lawyers said then.

LabMD tried to halt the FTC's data breach proceeding by filing a lawsuit in U.S. District Court for the Northern District of Georgia in 2013. This month, Judge William Duffey Jr. ruled he didn't have jurisdiction to stop the FTC's case, although he was critical of what he called a lack of data security guidance issued by the FTC.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's email address is grant_gross@idg.com.



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