[Federal Register Volume 85, Number 132 (Thursday, July 9, 2020)]
[Notices]
[Pages 41238-41241]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-14782]


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FEDERAL TRADE COMMISSION

[File No. 182 3189]


RagingWire Data Centers, Inc.; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement; Request for Comment.

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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 August 10, 2020.

ADDRESSES: Interested parties may file comments online or on paper by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write ``RagingWire Data 
Centers, Inc.; File No. 182 3189'' on your comment, and file your 
comment online at https://www.regulations.gov by following the 
instructions on the web-based form. If you prefer to file your comment 
on paper, 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.

FOR FURTHER INFORMATION CONTACT: Linda Holleran Kopp (202-326-2267), 
Bureau of Consumer Protection, Federal Trade Commission, 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 website (for June 30, 2020), at this web address: 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 August 10, 2020. 
Write ``RagingWire Data Centers, Inc.; File No. 182 3189'' 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 https://www.regulations.gov website.
    Due to the public health emergency in response to the COVID-19 
outbreak and the agency's heightened security screening, postal mail 
addressed to the Commission will be subject to delay. We strongly 
encourage you to submit your comments online through the https://www.regulations.gov website.
    If you prefer to file your comment on paper, write ``RagingWire 
Data Centers, Inc.; File No. 182 3189'' 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 
website at https://www.regulations.gov, you are solely responsible for 
making sure 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 your comment does not include 
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

[[Page 41239]]

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 the proposed settlement. 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 August 10, 2020. 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 final approval, an agreement containing a consent order from NTT 
Global Data Centers Americas, Inc., formerly known as RagingWire Data 
Centers, Inc. (``NTT Global''). The proposed consent order seeks to 
resolve allegations against NTT Global in the administrative complaint 
issued by the Commission on November 7, 2019.
    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 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.
    This matter concerns alleged false or misleading representations by 
NTT Global concerning its participation in, and compliance with, the 
EU-U.S. Privacy Shield Framework agreed upon by the U.S. and the 
European Union (``EU''). The Privacy Shield Framework allows U.S. 
companies to receive personal data transferred from the EU without 
violating EU law. The Framework consists of a set of principles and 
related requirements that have been deemed by the European Commission 
as providing ``adequate'' privacy protection. The principles include 
notice; choice; accountability for onward transfer; security; data 
integrity and purpose limitation; access; and recourse, enforcement, 
and liability. The related requirements include, for example, securing 
an independent recourse mechanism to handle any disputes about how the 
company manages information about EU citizens.
    To participate in the Privacy Shield Framework, a company must 
comply with the Privacy Shield principles and self-certify its 
compliance to the U.S. Department of Commerce (``Commerce''). Commerce 
reviews companies' self-certification applications and maintains a 
public website, https://www.privacyshield.gov/list, where it posts the 
names of companies that have completed the requirements for 
certification. Companies are required to recertify every year in order 
to continue benefitting from Privacy Shield.
    NTT Global provides secure data centers for housing its clients' 
servers (called colocation services) and related services. In a four-
count complaint, the Commission alleged that NTT Global violated 
Section 5(a) of the Federal Trade Commission Act by falsely 
representing in its privacy policy, published on its website at https://www.ragingwire.com, and in various marketing materials that it was a 
self-certified participant in, and that it complied with, the Privacy 
Shield Framework when it did not. Specifically, the complaint alleged 
that NTT Global continued to represent that it was a Privacy Shield 
participant after allowing its certification to lapse. The complaint 
also alleged that NTT Global failed to comply with three substantive 
Privacy Shield requirements by not: (a) Providing an independent 
recourse mechanism for the entire time it was a Privacy Shield 
participant; (b) annually verifying that its assertions regarding its 
Privacy Shield practices were implemented and in accord with the 
Privacy Shield principles; and (c) affirming or verifying, after it was 
withdrawn from the Framework, that it would delete or return 
information collected or that it would continue its ongoing commitment 
to protect any retained data it had received pursuant to Privacy 
Shield.
    Part I of the proposed order prohibits NTT Global from making 
misrepresentations about its membership in any privacy or security 
program sponsored by the government or any other self-regulatory or 
standard-setting organization, including, but not limited to, the EU-
U.S. Privacy Shield Framework, the Swiss-U.S. Privacy Shield Framework, 
and the Asia-Pacific Economic Cooperation (``APEC'') Privacy Framework.
    Part II of the proposed order requires that, for so long as NTT 
Global participates in Privacy Shield, it must obtain an annual 
compliance review from a third party assessor that demonstrates that 
NTT Global's assertions related to its Privacy Shield practices were 
implemented and are in accord with the Privacy Shield principles. The 
third-party assessor must be approved by the Associate Director of the 
Division of Enforcement of the FTC's Bureau of Consumer Protection, and 
must sign a statement verifying the successful completion of each 
annual compliance review.
    Part III of the proposed order requires that, in the case of any 
future lapse in NTT Global's Privacy Shield certification, the company 
affirm to Commerce that it will continue to apply the Privacy Shield 
Framework principles to any data it received pursuant to the Framework, 
protect the data by another means authorized under EU or Swiss law, or 
delete or return such data.
    Parts IV through VII of the proposed order are reporting and 
compliance provisions. Part IV requires acknowledgement of the order 
and dissemination of the order now and in the future to persons with 
responsibilities relating to the subject matter of the order. Part V 
ensures notification to the FTC of changes in corporate status and 
mandates that the company submit an initial compliance report to the 
FTC. Part VI requires the company to create and retain certain 
documents relating to its compliance with the order. Part VII mandates 
that the company make available to the FTC information or subsequent 
compliance reports, as requested.
    The order will generally last for twenty (20) years.
    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, Commissioner Chopra dissenting, 
Commissioner Slaughter not participating.
April J. Tabor,
Secretary.

Majority Statement of Chairman Joseph J. Simons and Commissioners Noah 
Joshua Phillips and Christine S. Wilson in the Matter of NTT Global 
Data Centers Americas, Inc.

    The Federal Trade Commission remains committed to enforcing the EU-
U.S. Privacy Shield and Swiss-U.S. Privacy Shield programs, and the 
order

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we approve today is consistent with that commitment. This order is, in 
fact, more protective of the Privacy Shield Principles than the 14 
orders this Commission (including Commissioner Chopra) has approved in 
prior Privacy Shield cases. Specifically, it requires Respondent to 
obtain third-party assessments for as long as it participates in 
Privacy Shield.
    Notably, this heightened obligation exceeds the scope of the notice 
order that the Commission (including Commissioner Chopra) unanimously 
approved in November 2019 in this case. Commissioner Chopra asserts 
that new facts have emerged in litigation that would support even more 
relief. But what staff did here is obtain additional evidence, through 
discovery, that supports the complaint's allegations. The Commission 
had reason to believe that Respondent's Privacy Shield representations 
were included in a variety of publications and were material when we 
voted to litigate. During litigation, staff uncovered further evidence 
confirming materiality. This should not have come as a surprise to 
Commissioner Chopra. For example, the complaint specifically alleges 
that Respondent claimed, both in its privacy policy and in marketing 
materials, that it participated in Privacy Shield, and staff found 
evidence that Respondent was, in fact, touting its participation in 
Privacy Shield as a selling point.
    Commissioner Chopra would ask us to reject a settlement that 
protects consumers and furthers our Privacy Shield goals, to instead 
continue litigation during an ongoing pandemic. There is no need and 
doing so would unnecessarily divert resources from other important 
matters, including investigations of other substantive violations of 
Privacy Shield. We do not support moving the goalposts in this manner 
\1\ and for this reason vote to accept the settlement, which not just 
accords with but exceeds the relief the Commission unanimously sought 
to obtain at the outset of the case.
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    \1\ Commissioner Chopra attempts to distinguish his earlier 
approval of settlements by arguing that additional relief is 
warranted in cases involving large businesses that violate 
substantive provisions of Privacy Shield. Notably, however, several 
recent settlements approved unanimously by this Commission that 
similarly alleged substantive violations of Privacy Shield involved 
companies that also generated substantial revenue, nor have the 
allegations or the defendant changed since the Commission initially 
approved the notice order.
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Dissenting Statement of Commissioner Rohit Chopra Regarding the EU-U.S. 
Privacy Shield Framework in the Matter of NTT Global Data Centers 
Americas, Inc.

Summary

     American businesses that participate in the EU-U.S. 
Privacy Shield Framework should not have to compete with those that 
break their privacy promises.
     The FTC charged a data center company with violating their 
Privacy Shield commitments, but our proposed settlement does not even 
attempt to adequately remedy the harm to the market.
     The evidence in the record raises serious concerns that 
customers looking to follow the law relied on the company's 
representations and may be locked into long-term contracts.
     A quick settlement with a small firm for an inadvertent 
mistake may be appropriate, but it is inadequate for a dishonest, large 
firm violating a core pillar of Privacy Shield.
     We must consider seeking additional remedies, including 
rights to renegotiate contracts, disgorgement of ill-gotten revenue and 
data, and notice and redress for customers.

EU-U.S. Privacy Shield Framework

    European companies seeking to comply with data protection rules 
need to ensure that their service providers are on the right side of 
the law. To adhere to legal requirements when transferring personal 
data from Europe to the United States, these companies prefer to work 
with partners that participate in the EU-U.S. Privacy Shield Framework, 
the cross-border data-sharing protocol between the European Union and 
the United States. One of the ways that American companies can 
distinguish themselves to prospective clients in the European Union is 
to participate (or work with a participant) in the Privacy Shield 
program, administered by the U.S. Department of Commerce. By 
participating, American companies must comply with a list of 
requirements on data protection, and they agree to be held accountable 
for these commitments. For example, companies must articulate how 
individuals can access the personal data held by the participating 
company, explain the ways in which individuals can limit the use and 
disclosure of their personal data, and provide individuals access, at 
no charge, to an independent recourse mechanism to resolve disputes. 
Importantly, the Federal Trade Commission can take enforcement actions 
against companies that violate their Privacy Shield promises.

Strengthening the FTC Cross-Border Data Transfer Enforcement Program

    Typically, the FTC uses this enforcement authority by entering into 
no-money, no-fault settlements where a company simply agrees it will 
stop breaking the law. I believe it is critical that we approach our 
enforcement program with a mindset of seeking continuous improvement, 
given the integral role we play to root out deception in this arena.
    Deception does not simply harm consumers; it also harms honest 
businesses and it distorts fair competition. This is not a new 
concept--it is longstanding policy. I continue to believe that our 
Privacy Shield enforcement program can do more to protect and redress 
individuals in the European Union, while also ensuring honest American 
firms participating in the Privacy Shield program do not have to 
compete with companies that break their privacy promises.\1\
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    \1\ In 1983, even as the Federal Trade Commission formally 
adopted a more lenient posture toward deception, the FTC Policy 
Statement on Deception noted that the prohibition on deceptive 
practices is ``intended to prevent injury to competitors as well as 
to consumers. . . . Deceptive practices injure both competitors and 
consumers because consumers who preferred the competitor's product 
are wrongly diverted.'' FTC Statement on Deception, 103 F.T.C. 174 
(1983) (appended to Cliffdale Assocs., Inc., 103 F.T.C. 110, 174 
(1984)), available at https://www.ftc.gov/system/files/documents/public_statements/410531/831014deceptionstmt.pdf.
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    The FTC Act permits the Commission to issue orders to companies 
after serving notice of its charges and offering the individual or 
company an opportunity to respond. Under our procedures, after the 
Commission charges a respondent with wrongdoing, the parties can 
exchange evidence in the discovery process and an Administrative Law 
Judge ultimately presides over a trial. At the conclusion of these 
procedures, whether through appeal or directly, the Commission can 
issue an order to the Respondent if the Commission concludes that there 
was a law violation.
    But the process does not end there. After entering an order, the 
Commission can obtain additional remedies from a federal court if we 
have reason to believe that the misconduct was ``dishonest'' or 
``fraudulent.'' \2\ These

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remedies include monetary restitution and rescission of contracts. In 
an administrative settlement, the Commission can obtain the full range 
of these remedies, since it is forgoing further litigation in federal 
court.
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    \2\ Under 15 U.S.C. 57b, ``[i]f the Commission satisfies the 
court that the act or practice to which the cease and desist order 
relates is one which a reasonable man would have known under the 
circumstances was dishonest or fraudulent,'' it can seek 
``rescission or reformation of contracts, the refund of money or 
return of property, the payment of damages, and public 
notification[.]''
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FTC's Administrative Complaint and Proposed Settlement With NTT

    I have long been concerned with the FTC's Privacy Shield 
enforcement strategy, which overwhelmingly targets small businesses, 
some of whom may have made inadvertent mistakes. But these mistakes 
were still violations of law, and most of these orders did not involve 
violations of substantive protections of the Privacy Shield framework, 
so I have supported quick settlements with these small businesses given 
our limited resources. However, the FTC encountered a very different 
situation with a major data center company.
    In November 2019, the Commission charged NTT Global Data Centers 
Americas (NTT), a major data center company controlled by Nippon 
Telephone & Telegraph formerly known as RagingWire, with failing to 
live up to its promises under the EU-U.S. Privacy Shield Framework. The 
Commission alleged that the company misrepresented its Privacy Shield 
participation and failed to meet certain obligations when it was a 
participant, including one of the core pillars: providing users with 
the ability to file complaints and disputes about their personal data. 
An administrative proceeding commenced, and NTT denied most of the 
Commission's allegations.\3\
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    \3\ Answer and Affirmative Defenses of Respondent RagingWire 
Data Centers, LLC, NTT Global Data Centers Americas, Inc., Docket 
No. 9386 (Nov. 25, 2019), https://www.ftc.gov/system/files/documents/cases/d09386_nov_25-r_answer_and_affirmative_defensepublic596761.pdf. In its answer, the 
company denied that it disseminated sales materials touting its 
participation in Privacy Shield. Answer ]] 20-21.
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    The Commission now proposes to end the administrative litigation 
through a no-money, no-fault settlement that does not include any of 
the additional remedies available under the FTC Act for ``dishonest'' 
conduct. I believe the proposed settlement should be renegotiated, 
given that the additional evidence gathered suggests that the company's 
conduct was dishonest.
    It is clear that the company's misrepresentations about Privacy 
Shield were not limited to a reference in its privacy policy. Most 
importantly, there was clear evidence of reliance on NTT's 
representations regarding its privacy protocols as a prerequisite for 
purchasing. Take the example of a customer of NTT, DreamHost, which 
offers web hosting services. DreamHost clearly values privacy. It 
carefully vets its partners to ensure compliance with the EU's General 
Data Protection Regulation. DreamHost specifically checks to see 
whether a prospective partner is a Privacy Shield participant. If not, 
DreamHost must take other steps to ensure that it meets its data 
protection obligations. The evidence in the record suggests that 
DreamHost is locked into a five-year contract that will not expire 
until 2022.\4\ Making matters worse, [non-public information redacted]. 
In other words, NTT's deception and dishonesty appears to have 
generated sales from customers who were seeking to protect customer 
privacy. This distorted the market, as NTT's competitors likely lost 
sales due to the alleged deception.
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    \4\ See Declaration of Christopher Ghazarian, NTT Global Data 
Centers Americas, Inc., Docket No. 9386 (Dec. 20, 2019).
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    The proposed settlement does nothing for companies that put a 
premium on privacy, like DreamHost. A more appropriate settlement would 
include redress for customers, forfeiture of the company's gains from 
any deceptive sales practices, or a specific admission of liability 
that would allow its customers to pursue claims in private litigation. 
Perhaps most importantly, NTT customers that entered into long-term 
contracts should be free to renegotiate or terminate these agreements 
if they were finalized during the period when NTT was engaged in the 
alleged deceptive conduct. Companies like DreamHost should not be 
locked into long-term contracts with NTT, given the evidence of 
dishonest conduct. Contract remedies would allow customers to switch to 
NTT's law-abiding Privacy Shield-compliant competitors, who may have 
lost business due to the deception. Even if the Commission sought one 
or more of these remedies and NTT subsequently declined to agree, it 
would have been more prudent to resume the administrative 
litigation,\5\ at an appropriate time.\6\
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    \5\ As noted earlier, if the Commission entered a final cease-
and-desist order at the conclusion of litigation, I believe this 
could trigger civil penalties, pursuant to Section 5(m)(1)(B) of the 
FTC Act, for other companies with knowledge of the order that do not 
fulfill their obligations under the EU-U.S. Privacy Shield Framework 
or other privacy or security programs sponsored by the government or 
a standard-setting organization. In addition, there is a paucity of 
litigated FTC cases in the data protection arena, which hampers 
development of the law.
    \6\ While I have great faith that our staff would be able to 
successfully renegotiate the existing no-money, no-fault settlement, 
I would be willing to continue the administrative proceeding at some 
time in the future. The Commission has voted to issue a number of 
orders to pause administrative proceedings, given the safety and 
logistical concerns associated with the current pandemic.
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    For these reasons, I respectfully dissent.

[FR Doc. 2020-14782 Filed 7-8-20; 8:45 am]
BILLING CODE 6750-01-P