E6-19965. Guidance Software, Inc.; Analysis of Proposed Consent Order To Aid Public Comment

AGENCY:

Federal Trade Commission.

ACTION:

Proposed Consent Agreement.

SUMMARY:

The consent agreement in this matter settles alleged violations of federal law prohibiting unfair or deceptive acts or practices or unfair methods of competition. The attached Analysis to Aid Public Comment describes both the allegations in the draft complaint and the terms of the consent order—embodied in the consent agreement—that would settle these allegations.

DATES:

Comments must be received on or before December 15, 2006.

ADDRESSES:

Interested parties are invited to submit written comments. Comments should refer to “Guidance Software, File No. 062 3957,” to facilitate the organization of comments. A comment filed in paper form should include this reference both in the text and on the envelope, and should be mailed or delivered to the following address: Federal Trade Commission/Office of the Secretary, Room 135-H, 600 Pennsylvania Avenue, NW., Washington, DC 20580. Comments containing confidential material must be filed in paper form, must be clearly labeled “Confidential,” and must comply with Commission Rule 4.9(c). 16 CFR 4.9(c) (2005).^[1] The FTC is requesting that any comment filed in paper form be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions. Comments that do not contain any nonpublic information may instead be filed in electronic form as part of or as an attachment to e-mail messages directed to the following e-mail box: [e-mail].

The FTC Act and other laws the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. All timely and responsive public comments, whether filed in paper or electronic form, will be considered by the Commission, and will be available to the public on the FTC Web site, to the extent practicable, at hhtp://www.ftc.gov. As a matter of discretion, the FTC makes every effort to remove home contact information for individuals from the public comments it receives before placing those comments on the FTC website. More information, including routine uses permitted by the Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/​ftc/​privacy.htm.

FOR FURTHER INFORMATION CONTACT:

Alain Sheer, Bureau of Consumer Protection, 600 Pennsylvania Avenue, NW., Washington, DC 20580, [phone].

SUPPLEMENTARY INFORMATION:

Pursuant to section 6(f) of the Federal Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and § 2.34 of the Commission Rules of Practice, 16 CFR 2.34, notice is hereby given that the above-captioned consent agreement containing a consent order to cease and desist, having been filed with and accepted, subject to final approval, by the Commission, has been placed on the public record for a period of thirty (30) days. The following Analysis to Aid Public Comment describes the terms of the consent agreement, and the allegations in the complaint. An electronic copy of the full text of the consent agreement package can be obtained from the FTC Home Page (for November 16, 2006), on the World Wide Web, at http://www.ftc.gov/​os/​2006/​11/​index.htm. A paper copy can be obtained from the FTC Public Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., Washington, DC 20580, either in person or by calling [phone].

Public comments are invited, and may be filed with the Commission in either paper or electronic form. All comments should be filed as prescribed in the ADDRESSES section above, and must be received on or before the date specified in the DATES section.

Analysis of Agreement Containing Consent Order To Aid Public Comment

The Federal Trade Commission has accepted, subject to final approval, a consent agreement from Guidance Software Inc. (“Guidance”).

The proposed consent order has been placed on the public record for thirty (30) days for receipt of comments by interested persons. Comments received during this period will become part of the public record. After thirty (30) days, the Commission will again review the agreement and the comments received, and will decide whether it should withdraw from the agreement and take appropriate action or make final the agreement's proposed order.

Guidance sells software and related training, materials, and services that customers use to, among other things, investigate and respond to computer breaches and other security incidents. In selling its products and services, Guidance routinely collected sensitive personal information from customers, including name, address, e-mail address, telephone number, and, for customers paying with a credit card, the card number, expiration date, and security code number. It collected this information through its website, sales representatives, and telephone and fax orders and stored the information on its computer network. This matter concerns alleged false or misleading representations Guidance made about the security it provided for this information.

The Commission's proposed complaint alleges that Guidance represented that it implemented reasonable and appropriate security measures to protect the privacy and confidentiality of personal information. The complaint alleges this representation was false because Guidance engaged in a number of practices that, taken together, failed to provide reasonable and appropriate security for sensitive personal information stored on its computer network. In particular, although it employed SSL encryption, Guidance: (1) Stored the information in clear readable text; (2) did not adequately assess the vulnerability of its web application and network to certain commonly known or reasonably foreseeable attacks, such as “Structured Query Language” (or “SQL”) injection attacks; (3) did not implement simple, low-cost, and readily available defenses to such attacks; (4) stored in clear readable text network user credentials that facilitate access to sensitive personal information on the network; (5) did not use readily available security measures to monitor and control connections from the network to the Internet; and (6) failed to employ sufficient measures to detect unauthorized access to sensitive personal information.

The complaint further alleges that beginning in September 2005 and continuing through December 7, 2005, a hacker exploited these vulnerabilities by using SQL injection attacks on Guidance's Web site and web application to install common hacking programs on Guidance's computer network. The hacking programs were used to find sensitive personal information, including credit card numbers, expiration dates, and security code numbers, stored on the network and to transmit the information over the Internet to computers outside the network. As a result, the hacker obtained unauthorized access to information for thousands of credit cards.

The proposed order applies to personal information Guidance obtains from consumers. It contains provisions designed to prevent Guidance from engaging in the future in practices similar to those alleged in the complaint.

Part I of the proposed order prohibits Guidance, in connection with the online advertising, marketing, promotion, offering for sale, or sale of any product or service, from misrepresenting the extent to which it maintains and protects the privacy, confidentiality, or security of any personal information collected from or about consumers.

Part II of the proposed order requires Guidance to establish and maintain a comprehensive information security program in writing that is reasonably designed to protect the security, confidentiality, and integrity of personal information collected from or about consumers. The security program must contain administrative, technical, and physical safeguards appropriate to Guidance's size and complexity, the nature and scope of its activities, and the sensitivity of the personal information collected from or about consumers. Specifically, the order requires Guidance to:

Designate an employee or employees to coordinate and be accountable for the information security program.

Identify material internal and external risks to the security, confidentiality, and integrity of customer information that could result in the unauthorized disclosure, misuse, loss, alteration, destruction, or other compromise of such information, and assess the sufficiency of any safeguards in place to control these risks.

Design and implement reasonable safeguards to control the risks identified through risk assessment, and regularly test or monitor the effectiveness of the safeguards' key controls, systems, and procedures.

Develop and use reasonable steps to retain service providers capable of appropriately safeguarding personal information they receive from Guidance, require service providers by contract to implement and maintain appropriate safeguards, and monitor their safeguarding of personal information.

Evaluate and adjust its information security program in light of the results of testing and monitoring, any material changes to its operations or business arrangements, or any other circumstances that it knows or has reason to know may have material impact on its information security program.

Part III of the proposed order requires that Guidance obtain within 180 days, and on a biennial basis thereafter for a period of ten (10) years, an assessment and report from a qualified, objective, independent third-party professional, certifying, among other things, that: (1) It has in place a security program that provides protections that meet or exceed the protections required by Part II of the proposed order; and (2) its security program is operating with sufficient effectiveness to provide reasonable assurance that the security, confidentiality, and integrity of consumers' personal information has been protected.

Parts IV through VIII of the proposed order are reporting and compliance provisions. Part IV requires Guidance to retain documents relating to their compliance with the order. For most records, the order requires that the documents be retained for a five-year period. For the third-party assessments and supporting documents, Guidance must retain the documents for a period of three years after the date that each assessment is prepared. Part V requires dissemination of the order now and in the future to persons with responsibilities relating to the subject matter of the order. Part VI ensures notification to the FTC of changes in corporate status. Part VII mandates that Guidance submit compliance reports to the FTC. Part VIII is a provision “sunsetting” the order after twenty (20) years, with certain exceptions.

The purpose of this analysis is to facilitate public comment on the proposed order. It is not intended to constitute an official interpretation of the proposed order or to modify their terms in any way.

By direction of the Commission.

Donald S. Clark,

Secretary.

Footnotes

1.  The comment must be accompanied by an explicit request for confidential treatment, including the factual and legal basis for the request, and must identify the specific portions of the comment to be withheld from the public record. The request will be granted or denied by the Commission's General Counsel, consistent with applicable law and the public interest. See Commission Rule 4.9(c), 16 CFR 4.9(c).