[Federal Register Volume 78, Number 40 (Thursday, February 28, 2013)]
[Notices]
[Pages 13673-13675]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-04606]


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FEDERAL TRADE COMMISSION

[File No. 122 3049]


HTC America, 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 March 22, 2013.

ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/htcamericaconsent online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write ``HTC America, File No. 
122 3049'' on your comment and file your comment online at https://ftcpublic.commentworks.com/ftc/htcamericaconsent by following the 
instructions on the web-based form. If you prefer to file your comment 
on paper, mail or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Room H-113 (Annex 
D), 600 Pennsylvania Avenue NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Nithan Sannappa (202-326-2674) or 
Jonathan E. Zimmerman (202-326-2049), FTC, Bureau of Consumer 
Protection, 600 Pennsylvania Avenue NW., Washington, DC 20580.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 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 February 22, 2013), on the World Wide Web, 
at http://www.ftc.gov/os/actions.shtm. 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.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before March 22, 2013. 
Write ``HTC America, File No. 122 3049'' on your comment. Your comment 
``including your name and your state'' will be placed on the public 
record of this proceeding, including, to the extent practicable, on the 
public Commission Web site, at http://www.ftc.gov/os/publiccomments.shtm. As a matter of discretion, the Commission tries to 
remove individuals' home contact information from comments before 
placing them on the Commission Web site.
    Because your comment will be made public, you are solely 
responsible for making sure that your comment does not include any 
sensitive personal information, like anyone's Social Security number, 
date of birth, driver's license number or other state identification 
number or foreign country equivalent, passport number, financial 
account number, or credit or debit card number. You are also solely 
responsible for making sure that your comment does not include any 
sensitive health information, like medical records or other 
individually identifiable health information. In addition, do not 
include any ``[t]rade secret or any commercial or financial information 
which * * * is privileged or confidential,'' as discussed in Section 
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 
4.10(a)(2). In particular, do not include competitively sensitive 
information such as costs, sales statistics, inventories, formulas, 
patterns, devices, manufacturing processes, or customer names.
    If you want the Commission to give your comment confidential 
treatment, you must file it in paper form, with a request for 
confidential treatment, and you have to follow the procedure explained 
in FTC Rule 4.9(c), 16 CFR

[[Page 13674]]

4.9(c).\1\ Your comment will be kept confidential only if the FTC 
General Counsel, in his or her sole discretion, grants your request in 
accordance with the law and the public interest.
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    \1\ In particular, the written request for confidential 
treatment that accompanies the comment must include the factual and 
legal basis for the request, and must identify the specific portions 
of the comment to be withheld from the public record. See FTC Rule 
4.9(c), 16 CFR 4.9(c).
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    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online. To make sure that the Commission considers your 
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/htcamericaconsent by following the instructions on the web-based 
form. If this Notice appears at http://www.regulations.gov/#!home, you 
also may file a comment through that Web site.
    If you file your comment on paper, write ``HTC America, File No. 
122 3049'' on your comment and on the envelope, and mail or deliver it 
to the following address: Federal Trade Commission, Office of the 
Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue NW., 
Washington, DC 20580. If possible, submit your paper comment to the 
Commission by courier or overnight service.
    Visit the Commission Web site at http://www.ftc.gov to read this 
Notice and the news release describing it. The FTC Act and other laws 
that the Commission administers permit the collection of public 
comments to consider and use in this proceeding as appropriate. The 
Commission will consider all timely and responsive public comments that 
it receives on or before March 22, 2013. You can find more information, 
including routine uses permitted by the Privacy Act, in the 
Commission?s privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

Analysis of Agreement Containing Consent Order To Aid Public Comment

    The Federal Trade Commission has accepted, subject to final 
approval, a consent order applicable to HTC America, Inc. (``HTC'').
    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.
    HTC is a mobile device manufacturer that develops and manufactures 
smartphones and tablet computers using Google Inc.'s Android operating 
system and Microsoft Corporation's Windows Mobile and Windows Phone 
operating systems. HTC has customized its Android-based mobile devices 
by adding or modifying various pre-installed applications and 
components in order to differentiate its products from those of 
competitors also manufacturing Android-based mobile devices. HTC has 
also customized both its Android and Windows Mobile devices in order to 
comply with the requirements of certain network operators. As the 
customized applications and components are pre-installed on the device, 
consumers do not choose to install the customized applications and 
components, and the device user interface does not provide consumers 
with an option to uninstall or remove the customized applications and 
components from the device.
    The Commission's complaint alleges that HTC engaged in a number of 
practices that, taken together, failed to provide reasonable and 
appropriate security in the design and customization of software on its 
mobile devices. Among other things, HTC:
    (1) Failed to implement an adequate program to assess the security 
of products it shipped to consumers;
    (2) Failed to implement adequate privacy and security guidance or 
training for its engineering staff;
    (3) Failed to conduct assessments, audits, reviews, or tests to 
identify potential security vulnerabilities in its mobile devices;
    (4) Failed to follow well-known and commonly-accepted secure 
programming practices, including secure practices that were expressly 
described in the operating system's guides for manufacturers and 
developers, which would have ensured that applications only had access 
to users' information with their consent;
    (5) Failed to implement a process for receiving and addressing 
security vulnerability reports from third-party researchers, academics 
or other members of the public, thereby delaying its opportunity to 
correct discovered vulnerabilities or respond to reported incidents.
    The complaint further alleges that, due to these failures, HTC 
introduced numerous security vulnerabilities in the process of 
customizing its mobile devices. Once in place, HTC failed to detect and 
mitigate these vulnerabilities, which, if exploited, provide third-
party applications with unauthorized access to sensitive information 
and sensitive device functionality. The sensitive device functionality 
potentially exposed by the vulnerabilities includes the ability to send 
text messages without permission, the ability to record audio with the 
device's microphone without permission, and the ability to install 
other applications, including malware, onto the device without the 
user's knowledge or consent. The complaint alleges that malware placed 
on consumers' devices without their permission could be used to record 
and transmit information entered into or stored on the device, 
including financial account numbers and related access codes or 
personal identification numbers, and medical information. In addition, 
other sensitive information exposed by the vulnerabilities includes, 
but is not limited to, location information, the contents of text 
messages, the user's personal phone number, phone numbers of contacts, 
phone numbers of those who send text messages to the user, and the 
user's web and media viewing history.
    The proposed order contains provisions designed to prevent HTC from 
engaging in the future in practices similar to those alleged in the 
complaint.
    Part I of the proposed order prohibits HTC from misrepresenting the 
extent to which HTC or its products or services--including any covered 
device--use, maintain and protect the security of covered device 
functionality or the security, privacy, confidentiality, or integrity 
of covered information from or about consumers. Part II of the proposed 
order requires HTC to (1) address security risks related to the 
development and management of new and existing covered devices, and (2) 
protect the security, confidentiality, and integrity of covered 
information, whether collected by respondent or input into, stored on, 
captured with, accessed or transmitted through a covered device. The 
security program must contain administrative, technical, and physical 
safeguards appropriate to HTC's size and complexity, nature and scope 
of its activities, and the sensitivity of the information collected 
from or about consumers. Specifically, the proposed order requires HTC 
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 of covered devices that could result in unauthorized access to 
or use of covered device functionality, and assess the

[[Page 13675]]

sufficiency of any safeguards in place to control these risks;
     Identify material internal and external risks to the 
security, confidentiality, and integrity of covered information that 
could result in the unauthorized disclosure, misuse, loss, alteration, 
destruction, or other compromise of such information, whether such 
information is in HTC's possession or is input into, stored on, 
captured with, accessed or transmitted through a covered device, and 
assess the sufficiency of any safeguards in place to control these 
risks;
     Consider risks in each area of relevant operation, 
including but not limited to (1) employee training and management; (2) 
product design, development and research; (3) secure software design 
and testing, including secure engineering and defensive programming; 
and (4) review, assessment, and response to third-party security 
vulnerability reports;
     Design and implement reasonable safeguards to control the 
risks identified through risk assessment, including through reasonable 
and appropriate software security testing techniques, and regularly 
test or monitor the effectiveness of the safeguards' key controls, 
systems, and procedures;
     Develop and use reasonable steps to select and retain 
service providers capable of maintaining security practices consistent 
with the order, and require service providers by contract to implement 
and maintain appropriate safeguards; and
     Evaluate and adjust its information security program in 
light of the results of testing and monitoring, any material changes to 
HTC's operations or business arrangement, or any other circumstances 
that it knows or has reason to know may have a material impact on its 
security program.
    However, Part II does not require HTC to identify and correct 
security vulnerabilities in third parties' software on covered devices 
to the extent the vulnerabilities are not the result of respondent's 
integration, modification, or customization of the third party 
software.
    Part III of the proposed order requires HTC to develop security 
patches to fix the security vulnerabilities in each affected covered 
device having an operating system version released on or after December 
2010. Within thirty (30) days of service of the order, HTC must release 
the security patches either directly to affected covered devices or to 
the applicable network operator for deployment to the affected covered 
devices. HTC must provide users of the affected covered devices with 
clear and prominent notice regarding the availability of the security 
patches and instructions for installing the security patches.
    Part IV of the proposed order requires HTC to obtain, within the 
first one hundred eighty (180) days after service of the order and on a 
biennial basis thereafter for a period of 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 II of the proposed order; and (2) its 
security program is operating with sufficient effectiveness to provide 
reasonable assurance that the security of covered device functionality 
and the security, confidentiality, and integrity of covered information 
is protected.
    Parts V through IX of the proposed order are reporting and 
compliance provisions. Part V requires HTC to retain documents relating 
to its compliance with the order. The order requires that the documents 
be retained for a three-year period. Part VI requires dissemination of 
the order now and in the future to all current and future principals, 
officers, directors, and managers, and to persons with responsibilities 
relating to the subject matter of the order. Part VII ensures 
notification to the FTC of changes in corporate status. Part VIII 
mandates that HTC submit a compliance report to the FTC within 60 days, 
and periodically thereafter as requested. Part IX 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 complaint or order or to modify the 
order's terms in any way.

    By direction of the Commission, Chairman Leibowitz not 
participating and Commissioner Ohlhausen recused.
Donald S. Clark
Secretary.
[FR Doc. 2013-04606 Filed 2-27-13; 8:45 am]
BILLING CODE 6750-01-P