FTC Chairwoman Edith Ramirez Comments on Data Security for the Internet of Things

Published On January 12, 2015 | By Anna Hsia | FTC & State AG, General, Privacy

Happy New Year! For many, the holidays included exciting new gadgets. Whether it’s a new fitness tracker, a smart thermostat, or a smart glucose meter, these new connected devices have arrived, and new products are on the horizon. These products, termed the “Internet of Things” by privacy professionals, are broadly defined as products that can connect to a network.

On January 6, 2015, FTC Chairwoman Edith Ramirez delivered the opening remarks at the International Consumer Electronics Show, during which she spoke on security issues surrounding the Internet of Things (“IoT”). Chairwoman Ramirez discussed what she viewed as three key risks to consumer privacy, along with suggested industry solutions to mitigate those risks.

IoT Risks to Consumer Privacy

The first privacy and security risk of connected devices Chairwoman Ramirez identified was that connected devices engage in “ubiquitous data collection.” Because these devices can potentially collect personal information, including our habits, location, and physical condition, the data can lead to rich profiles of consumer preferences and behavior.

The second risk Chairwoman Ramirez identified was the possible unexpected use of consumer data acquired through connected devices. As an example, she asked whether data from a smart TV’s tracking of consumer television habits could be combined with other data to enable businesses to engage in targeted advertising or even exacerbate socio-economic disparities.

The third risk she identified was that connected devices can be hijacked, leading to misuse of personal information.

Suggested Industry Solutions

To combat the risks identified above, Chairwoman Ramirez suggested three solutions for the IoT industry. First, IoT companies should engage in “Security by Design,” namely that IoT products should be built initially with a priority on security, and that IoT companies should implement technical and administrative measures to ensure reasonable security. Chairwoman Ramirez identified five aspects of Security by Design:

  • conduct a privacy or security risk assessment as part of the design process;
  • test security measures before products launch;
  • use smart defaults—such as requiring consumers to change default passwords in the set-up process;
  • consider encryption, particularly for the storage and transmission of sensitive information, such as health data; and
  • monitor products throughout their life cycle and, to the extent possible, patch known vulnerabilities.

Second, Chairwoman Ramirez suggested that companies that collect personal information should engage in data minimization, viz. that they should collect only the data needed for a specific purpose and then safely destroy that data afterwards. Chairwoman Ramirez also urged companies to de-identify consumer data where possible.

Finally, Chairwoman Ramirez suggested that IoT companies provide notice and choice to consumers for unexpected collection or uses of their data. As an example, Chairwoman Ramirez stated that if IoT companies are sharing data from a smart thermostat or fitness band with data brokers or marketing firms, those companies should provide consumers with a “simple notice of the proposed uses of their data and a way to consent.”

Although not official FTC statements, these remarks by Chairwoman Ramirez provide valuable insight into how the Federal Trade Commission may regulate connected devices in the future. Companies in the IoT space should monitor further developments closely and review their data collection, security, and sharing practices accordingly.

Photo by Nicola from Flickr

About The Author

Anna Hsia maintains a diverse practice litigating complex business disputes and counseling clients on privacy issues. With broad litigation experience in unfair competition, false advertising, class actions, and other complex litigation, Anna guides clients through disputes in federal and state courts. As a Certified Information Privacy Professional, Anna has assisted clients with product development and compliance with privacy regulations such as the TCPA, HIPAA, COPPA, state-specific privacy regulations, the Gramm-Leach-Bliley Act, and the Fair Credit Reporting Act.

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