[Federal Register Volume 73, Number 65 (Thursday, April 3, 2008)]
[Notices]
[Pages 18281-18283]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-6950]


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FEDERAL TRADE COMMISSION

[File No. 072 3055]


The TJX Companies, Inc.; Analysis of Proposed Consent Order to 
Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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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 April 28, 2008.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``TJX, File No. 072 3055,'' 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, N.W., 
Washington, D.C. 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 by 
following the instructions on the web-based form at http://
secure.commentworks.com/ftc-TJX. To ensure that the Commission 
considers an electronic comment, you must file it on that web-based 
form.
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    \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).
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    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 website, to the extent 
practicable, at 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.shtm.

FOR FURTHER INFORMATION CONTACT: Alain Sheer or Molly Crawford, FTC 
Bureau of Consumer Protection, 600 Pennsylvania Avenue, NW, Washington, 
D.C. 20580, (202) 326-2252.

[[Page 18282]]


SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  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 March 27, 2008), on the World Wide Web, at http://www.ftc.gov/os/
2008/03/index.htm. A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW, Washington, 
D.C. 20580, either in person or by calling (202) 326-2222.
    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 The TJX Companies, Inc. (``TJX'').
    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.
    According to the Commission's complaint, TJX is an off-price 
retailer selling apparel and home fashions in over 2,500 stores 
worldwide. Consumers may pay for purchases at these stores with credit 
and debit cards (collectively, ``payment cards''), cash, or personal 
checks. In selling its products, TJX routinely uses its computer 
networks to collect personal information from consumers to obtain 
authorization for payment card purchases, verify personal checks, and 
process merchandise returned without receipts (``unreceipted 
returns''). Among other things, it collects: (1) account number, 
expiration date, and an electronic security code for payment card 
authorization; (2) bank routing, account, and check numbers and, in 
some instances, driver's license number and date of birth for personal 
check verification; and (3) name, address, and drivers' license or 
military or state identification number (``personal ID numbers'') for 
unreceipted returns (collectively, ``personal information''). This 
information is particularly sensitive because it can be used to 
facilitate payment card fraud and other consumer harm.
    The Commission's proposed complaint alleges that since at least 
July 2005, TJX engaged in a number of practices that, taken together, 
failed to provide reasonable and appropriate security for personal 
information on its computer networks. Among other things, TJX: (a) 
created an unnecessary risk to personal information by storing it on, 
and transmitting it between and within, in-store and corporate networks 
in clear text; (b) did not use readily available security measures to 
limit wireless access to its networks, thereby allowing an intruder to 
connect wirelessly to in-store networks without authorization; (c) did 
not require network administrators and other users to use strong 
passwords or to use different passwords to access different programs, 
computers, and networks; (d) failed to use readily available security 
measures to limit access among computers and the internet, such as by 
using a firewall to isolate card authorization computers; and (e) 
failed to employ sufficient measures to detect and prevent unauthorized 
access to computer networks or to conduct security investigations, such 
as by patching or updating anti-virus software or following up on 
security warnings and intrusion alerts.
    The complaint alleges that the breach compromised tens of millions 
of payment cards as well as the personal information of approximately 
455,000 consumers who had made unreceipted returns. The complaint 
further alleges that issuing banks have claimed tens of millions of 
dollars in fraudulent charges on some of these payment card accounts. 
Issuing banks also have cancelled and re-issued millions of payment 
cards, and according to the complaint, consumers holding these cards 
were unable to use them to access their credit and bank accounts until 
they received the replacement cards. Additionally, the complaint 
alleges that some consumers have obtained or will have to obtain new 
personal ID numbers, such as new drivers' licenses.
    The proposed order applies to personal information TJX collects 
from or about consumers. It contains provisions designed to prevent TJX 
from engaging in the future in practices similar to those alleged in 
the complaint.
    Part I of the proposed order requires TJX 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 TJX'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 TJX 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 personal 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 respondents, 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 the 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 a material 
impact on the effectiveness of their information security program.
    Part II of the proposed order requires that TJX obtain, covering 
the first 180 days after the order is served, and on a biennial basis 
thereafter for twenty (20) 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 I of the proposed order; and (2) its security program is operating 
with sufficient

[[Page 18283]]

effectiveness to provide reasonable assurance that the security, 
confidentiality, and integrity of consumers' personal information is 
protected.
    Parts III through VII of the proposed order are reporting and 
compliance provisions. Part III requires TJX to retain documents 
relating to its 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, TJX must retain the 
documents for a period of three years after the date that each 
assessment is prepared. Part IV requires dissemination of the order now 
and in the future to principals, officers, directors, and managers 
having responsibilities relating to the subject matter of the order. 
Part V ensures notification to the FTC of changes in corporate status. 
Part VI mandates that TJX submit an initial compliance report to the 
FTC, and make available to the FTC subsequent reports. Part VII is a 
provision ``sunsetting'' the order after twenty (20) years, with 
certain exceptions.
    This is the Commission's twentieth case to challenge the failure by 
a company to implement reasonable information security practices. Each 
of the Commission's cases to date has alleged that a number of security 
practices, taken together, failed to provide reasonable and appropriate 
security to prevent unauthorized access to consumers' information. The 
practices challenged in the cases have included, but are not limited 
to: (1) creating unnecessary risks to sensitive information by storing 
it on computer networks without a business need to do so; (2) storing 
sensitive information on networks in a vulnerable format; (3) failing 
to use readily available security measures to limit access to a 
computer network through wireless access points on the network; (4) 
failing to adequately assess the vulnerability of a web application and 
computer network to commonly known or reasonably foreseeable attacks; 
(5) failing to implement simple, low-cost, and readily available 
defenses to such attacks; (6) failing to use readily available security 
measures to limit access between computers on a network and between 
such computers and the internet, and (7) failing to use strong 
passwords to authenticate (or authorize) users to access programs and 
databases on computer networks or online.
    The purpose of the analysis is to aid public comment on the 
proposed order. It is not intended to constitute an official 
interpretation of the proposed order or to modify its terms in any way.
    By direction of the Commission.

Donald S. Clark
Secretary
[FR Doc. E8-6950 Filed 4-2-08: 8:45 am]
[BILLING CODE 6750-01-S]