[Federal Register Volume 83, Number 87 (Friday, May 4, 2018)]
[Notices]
[Pages 19762-19764]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-09545]


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FEDERAL TRADE COMMISSION

[File No. 172 3025]


BLU Products, Inc.; 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. The attached Analysis to Aid Public Comment describes both 
the allegations in the 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 May 30, 2018.

ADDRESSES: Interested parties may file a comment online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write: ``BLU Products, Inc.'' 
on your comment, and file your comment online at https://ftcpublic.commentworks.com/ftc/bluproductsconsent by following the 
instructions on the web-based form. If you prefer to file your comment 
on paper, write ``BLU Products, Inc.'' on your comment and on the 
envelope, and mail your comment to the following address: Federal Trade 
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite 
CC-5610 (Annex D), Washington, DC 20580; or deliver your comment to: 
Federal Trade Commission, Office of the Secretary, Constitution Center, 
400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC 
20024.

FOR FURTHER INFORMATION CONTACT: Jah-Juin Ho (202-326-3463) and Ryan 
Mehm (202-326-2918), 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 April 30, 2018), on the World Wide Web, at 
https://www.ftc.gov/news-events/commission-actions.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before May 30, 2018. 
Write ``BLU Products, Inc.'' 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 website, at https://www.ftc.gov/policy/public-comments.
    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/bluproductsconsent 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 website.
    If you prefer to file your comment on paper, write ``BLU Products, 
Inc.'' on your comment and on the envelope, and mail your comment to 
the following address: Federal Trade Commission, Office of the 
Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex D), 
Washington, DC 20580; or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Constitution Center, 
400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC 
20024. If possible, submit your paper comment to the Commission by 
courier or overnight service.
    Because your comment will be placed on the publicly accessible FTC 
website at https://www.ftc.gov, you are solely responsible for making 
sure that your comment does not include any sensitive or confidential 
information. In particular, your comment should not include any 
sensitive personal information, such as your or anyone else'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, such as medical records or other 
individually identifiable health information. In addition, your comment 
should not include any ``trade secret or any commercial or financial 
information which . . . is privileged or confidential''--as provided by 
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)--including in particular competitively sensitive 
information such as costs, sales statistics, inventories, formulas, 
patterns, devices, manufacturing processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule 4.9(c). 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). Your comment will be kept 
confidential only if the General Counsel grants your request in 
accordance with the law and the public interest. Once your comment has 
been posted on the public FTC website--as legally required by FTC Rule 
4.9(b)--we cannot redact or remove your comment from the FTC website, 
unless you submit a confidentiality request that meets the requirements 
for such treatment under FTC Rule 4.9(c), and the General Counsel 
grants that request.
    Visit the FTC website 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 May 30, 2018. For information on the Commission's 
privacy policy, including routine uses permitted by the Privacy Act, 
see https://www.ftc.gov/site-information/privacy-policy.

Analysis of Proposed Consent Order to Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted, subject 
to

[[Page 19763]]

final approval, an agreement containing a consent order from BLU 
Products, Inc. (``BLU'') and individual Respondent Samuel Ohev-Zion 
(collectively, ``Respondents'').
    The proposed consent order (``proposed 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 again 
will review the agreement and the comments received, and will decide 
whether it should withdraw from the agreement or make final the 
agreement's proposed order.
    BLU is a mobile device manufacturer that sells smartphone and other 
mobile devices to consumers through retailers such as Amazon, Walmart, 
and Best Buy. Samuel Ohev-Zion is an owner and the President and CEO of 
BLU. Individually or in concert with others, Mr. Ohev-Zion controlled 
or had authority to control, or participated in the acts and practices 
alleged in the proposed complaint.
    Respondents purchase the smartphones they sell to consumers from 
Original Device Manufacturers (``ODMs''). ODMs manufacture and 
customize mobile devices branded with the BLU name based on 
instructions provided by Respondents. As part of this process, since at 
least 2015, in order to provide firmware updating services, BLU has 
licensed software from ADUPS Technology Co., LTD (``ADUPS'') and 
directed ODMs to preinstall this software on Respondents' mobile 
devices.
    ADUPS is a China-based company that offers advertising, data 
mining, and firmware over-the-air (``FOTA'') update services to mobile 
and Internet of Things connected devices. FOTA updates allow device 
manufacturers to issue security patches or operating system upgrades to 
devices over wireless and cellular networks.
    Until at least November 2016 the ADUPS software on BLU devices 
transmitted personal information about consumers to ADUPS' servers 
without consumers' knowledge and consent, including the full contents 
of text messages, real-time cellular tower location data, call and text 
message logs with full telephone numbers, contact lists, and a list of 
applications used and installed on each device. ADUPS software 
collected and transmitted consumers' text messages to its servers every 
72 hours. ADUPS software also collected consumers' location data in 
real-time and transmitted this data back to its servers every 24 hours.
    The Commission's proposed two-count complaint alleges that 
Respondents violated Section 5(a) of the Federal Trade Commission Act. 
The first count alleges that Respondents deceived consumers about BLU's 
data collection and sharing practices by falsely representing in BLU's 
privacy policy that they limit the disclosure of users' information to 
third-party service providers only to the extent necessary to perform 
their services or functions on behalf of BLU and not for other 
purposes. Contrary to the privacy policy, personal information from BLU 
devices sold by Respondents was transmitted to ADUPS that was not 
needed to perform its services or functions on behalf of BLU, including 
FOTA updates.
    The second count alleges that Respondents deceived consumers about 
BLU's data security practices by falsely representing that they 
implemented appropriate physical, electronic, and managerial security 
procedures to protect the personal information provided by consumers. 
The proposed complaint alleges that Respondents did not implement 
appropriate physical, electronic and managerial security procedures. 
For example, the proposed complaint alleges that Respondents failed to 
implement appropriate security procedures to oversee the security 
practices of their service providers, such as by: (1) Failing to 
perform adequate due diligence in the selection and retention of 
service providers; (2) failing to adopt and implement written data 
security standards, policies, procedures or practices that apply to the 
oversight of their service providers; (3) failing to contractually 
require their service providers to adopt and implement data security 
standards, policies, procedures or practices; and (4) failing to 
adequately assess the privacy and security risks of third-party 
software, such as ADUPS.
    The proposed order contains provisions designed to prevent 
Respondents from engaging in the same or similar acts or practices in 
the future.
    Part I of the proposed order prohibits Respondents from 
misrepresenting: (1) The extent to which they collect, use, share, or 
disclose any personal information; (2) the extent to which consumers 
may exercise control over the collection, use, or disclosure of 
personal information; and (3) the extent to which the implement 
physical, electronic, and managerial security procedures to protect 
personal information.
    Part II of the proposed order requires Respondents to establish and 
implement, and thereafter maintain, a comprehensive security program 
that is reasonably designed 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 personal 
information. The program must be fully documented in writing and must 
contain administrative, technical, and physical safeguards appropriate 
to Respondents' size and complexity, the nature and scope of 
Respondents' activities, and the sensitivity of the covered device's 
function or the personal information.
    Part III of the proposed order requires Respondents to obtain an 
assessment and report from a qualified, objective, independent third-
party professional covering the first one hundred eighty (180) days 
after issuance of the order and each 2-year period thereafter for 20 
years after issuance of the order. Each assessment must, among other 
things: (1) Set forth the administrative, technical, and physical 
safeguards that Respondents have implemented during the reporting 
period; (2) explain how such safeguards are appropriate to Respondents' 
size and complexity, the nature and scope of Respondents' activities, 
and the sensitivity of the covered device's function or the personal 
information; (3) explain how the safeguards implemented meet or exceed 
the protections required by Part II of the proposed order; and (4) 
certify that Respondents' security program is operating with sufficient 
effectiveness to provide reasonable assurance that the security of 
covered devices and the privacy, security, confidentiality, and 
integrity of personal information is protected.
    Part IV of the proposed order requires Respondents, prior to 
collecting or disclosing any covered information, to: (A) Clearly and 
conspicuously disclose to the consumer, separate and apart from 
``privacy policy,'' ``terms of use'' page, or similar document, (1) the 
categories of covered information that Respondents collect, use, or 
share, (2) the identity of any third parties that receive any covered 
information, and (3) all purposes for Respondents' collection, use, or 
sharing of covered information; and (B) obtain the consumer's 
affirmative express consent.
    Parts V through IX of the proposed order are reporting and 
compliance provisions. Part V requires acknowledgment of the order and 
dissemination of the order now and in the future to persons with 
supervisory responsibilities and all employees, agents, and 
representatives who participate in conducted relating to the subject 
matter of the order. Part VI

[[Page 19764]]

ensures notification to the FTC of changes in corporate status and 
mandates that Respondents submit an initial compliance report to the 
FTC. Part VII requires Respondents to retain documents relating to its 
compliance with the order for a five (5) year period. Part VIII 
mandates that Respondents make available to the FTC information or 
subsequent compliance reports, as requested. Part IX is a provision 
``sunsetting'' the order after twenty (20) years, with certain 
exceptions.
    The purpose of this analysis is to aid public comment on the 
proposed order. It is not intended to constitute an official 
interpretation of the complaint or proposed order, or to modify in any 
way the proposed order's terms.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2018-09545 Filed 5-3-18; 8:45 am]
 BILLING CODE 6750-01-P