[Federal Register Volume 69, Number 82 (Wednesday, April 28, 2004)]
[Notices]
[Pages 23205-23207]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-9639]


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FEDERAL TRADE COMMISSION

[File No. 032-3209]


MTS, Inc., d/b/a Tower Records/Books/Video, and Tower Direct LLC, 
d/b/a TowerRecords.com; Analysis 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 that accompanies the consent agreement 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 May 21, 2004.

ADDRESSES: Comments should refer to ``MTS, Inc., d/b/a Tower Records/
Books/Video, et al., File No. 032 3209,'' 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 H-159, 600 Pennsylvania Avenue, NW., 
Washington, DC 20580. Comments containing confidential material must be 
filed in paper form, as explained in the SUPPLEMENTARY INFORMATION 
section. 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 filed in electronic 
form (except comments containing any confidential material) should be 
sent to the following e-mail box: [email protected].
    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 http://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 Web site. 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: Laura Mazzarella or Jessica Rich, FTC, 
Bureau of Consumer Protection, 600 Pennsylvania Avenue, NW., 
Washington, DC 20580, (202) 326-3224.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Section 2.34 
of the Commission's 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 April 21, 2004), on the World Wide Web, at http://www.ftc.gov/os/2004/04/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 (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. Written comments must be submitted 
on or before May 21, 2004. Comments should refer to ``MTS, Inc., d/b/a 
Tower Records/Books/Video, et al., File No. 032 3209,'' 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 H-159, 600 Pennsylvania 
Avenue, NW., Washington, DC 20580. If the comment contains any material 
for which confidential treatment is requested, it must be filed in 
paper (rather than electronic) form, and the first page of the document 
must be clearly labeled ``Confidential.'' \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 filed in electronic form should be sent to the 
following e-mail box: [email protected].
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    \1\ Commission Rule 4.2(d), 16 CFR 4.2(d). 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 Web site, to the extent 
practicable, at http://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 Web site. 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.

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission has accepted a consent agreement, 
subject to final approval, from MTS, Inc., and Tower Direct, LLC 
(``Tower''). Tower sells music and video recordings, books, and other 
entertainment products through retail stores and its Web site, 
TowerRecords.com.
    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 other appropriate action or make 
final the agreement's proposed order.
    This matter concerns alleged representations about the security of 
personal information collected online through TowerRecords.com, Tower's 
online store. According to the Commission's complaint, Tower offers its 
online customers an order status page that allows customers to confirm 
their orders and view their order information. In December 2002, Tower 
redesigned the ``check out'' portion of its Web site, including the 
order status page. As alleged in the Commission's complaint, the 
redesigned version of the order status page contained a security flaw 
that allowed any user of the site that entered a valid order number to 
view the personal identifying information and order history of the 
Tower customer who placed the order, including name, email address, 
billing address, shipping address, telephone number, and items ordered 
since 1996.
    The complaint charges that Tower falsely represented that it 
implemented reasonable and appropriate measures to protect the privacy 
and confidentiality of personal information. In particular, the 
complaint alleges that Tower failed

[[Page 23207]]

to implement procedures that were reasonable and appropriate to detect 
and prevent vulnerabilities in its Web site, including reasonable and 
appropriate procedures for writing and revising Web-application code.
    The proposed order applies to Tower's collection and storage of 
personal information from or about consumers in connection with its 
online business. It contains provisions designed to prevent Tower from 
future engagement in practices similar to those alleged in the 
complaint. The proposed order is substantially similar to the orders 
obtained by the Commission in the cases of Eli Lilly, Inc., FTC Docket 
No. C-4047 (May 8, 2002); Microsoft Corp., FTC Docket No. C-4069 (Dec. 
20, 2002); and Guess, Inc., FTC Docket No. C-4091 (July 30, 2003).
    Part I of the proposed order prohibits Tower, 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 Tower 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 Tower'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 Tower 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. At a minimum, this risk assessment must include consideration of 
risks in each area of relevant operation.
     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.
     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 Tower knows or has reason to know may have material 
impact on its information security program.
    Part III of the proposed order requires that Tower obtain within 
one year, and on a biannual basis thereafter for ten (10) years, an 
assessment and report from a qualified, objective, independent third-
party professional, certifying that: (1) Tower has in place a security 
program that provides protections that meet or exceed the protections 
required by Part II of this order; and (2) Tower's 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 VII of the proposed order are reporting and 
compliance provisions. Part IV requires Tower to retain documents 
relating to compliance. For most records, the order requires that the 
documents be retained for a five-year period. For the assessments and 
supporting documents, Tower must retain the documents for 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 Tower 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 its terms in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 04-9639 Filed 4-27-04; 8:45 am]
BILLING CODE 6750-01-P