[Federal Register Volume 70, Number 122 (Monday, June 27, 2005)]
[Notices]
[Pages 36939-36941]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-12631]


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FEDERAL TRADE COMMISSION

[File No. 042 3160]


BJ's Wholesale Club, 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.

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DATES: Comments must be received on or before July 16, 2005.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``BJ's Wholesale Club, Inc., File No. 042 
3160,'' 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 159-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: [email protected].
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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 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: Joel Winston, 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 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 June 16, 2005), on the World Wide Web, at http://www.ftc.gov/os/2005/06/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. 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 BJ's Wholesale Club, Inc. 
(``BJ's'').
    The consent agreement 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.
    BJ's operates about 150 warehouse clubs (``stores'') in 16 eastern 
states. BJ's is a membership club with about 8 million current members. 
Members often use credit and debit cards to pay for their purchases at 
BJ's. In the course of seeking approval for these credit and debit card 
purchases, BJ's collected members' personal information, including card 
number and expiration date and other information, from magnetic stripes 
on the cards.
    The Commission's proposed complaint alleges that BJ's stored 
members' personal information on computers at its stores and failed to 
employ reasonable and appropriate security measures to protect the 
information. The complaint alleges that this failure was an unfair 
practice because it caused or was likely to cause substantial consumer 
injury that was not reasonably avoidable and was not outweighed by 
countervailing benefits to consumers or competition. In particular, the 
complaint alleges that BJ's engaged in a number of practices which, 
taken together, did not provide reasonable security for sensitive 
personal information, including: (1) Failing to encrypt information 
collected in its stores while the information was in transit or stored 
on BJ's computer networks; (2) storing the information in files that 
could be accessed anonymously, that is, using a commonly known default 
user id and password; (3) failing to use readily available security 
measures to limit access to its networks through wireless access points 
on the networks; (4) failing to employ measures sufficient to detect 
unauthorized access to the networks or conduct security investigations; 
and (5) storing information for up to 30 days when BJ's no longer had a 
business need to keep the information, in violation of bank security 
rules.
    The complaint further alleges that several million dollars in 
fraudulent purchases were made using counterfeit copies of credit and 
debit cards members had used at BJ's stores. The counterfeit cards 
contained the same personal information BJ's had collected from the 
magnetic stripes of members' credit and debit cards and then stored on 
its computer networks. After discovering the fraudulent purchases, 
banks cancelled and re-issued thousands of credit and debit cards 
members had used at BJ's stores, and members holding these cards were 
unable to use them to access credit and their own bank accounts.
    The proposed order applies to personal information from or about 
consumers BJ's collects in connection with its business. It contains 
provisions designed to prevent BJ's from engaging in the future in 
practices similar to those alleged in the complaint.
    Specifically, Part I of the proposed order requires BJ's 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 it collects from 
or about consumers. The security program must contain administrative, 
technical, and physical safeguards appropriate to BJ's size and 
complexity, the nature and scope of its activities, and the sensitivity 
of the personal information collected. Specifically, the order requires 
BJ's to:
     Designate an employee or employees to coordinate and be

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accountable for the information security program.
     Identify material internal and external risks to the 
security, confidentiality, and integrity of consumer information that 
could result in 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.
     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 BJ's knows or has to reason to know may have a material impact on 
the effectiveness of its information security program.
    Part II of the proposed order requires that BJ's obtain within 180 
days, and on a biennial basis thereafter, an assessment and report from 
a qualified, objective, independent third-party professional, 
certifying, among other things, that: (1) BJ's 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) BJ'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 III through VII of the proposed order are reporting and 
compliance provisions. Part III requires BJ's to retain documents 
relating to its compliance with the order. Part IV requires 
dissemination of the order now and in the future to persons with 
responsibilities relating to the subject matter of the order. Part V 
requires BJ's to notify the Commission of changes in BJ's corporate 
status. Part VI mandates that BJ's submit compliance reports to the 
FTC. Part VII 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 to modify its terms in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 05-12631 Filed 6-24-05; 8:45 am]
BILLING CODE 6750-01-P