Privacy & Information Security Law Blog

On April 7, 2015, the FTC announced proposed settlements with TES Franchising, LLC, an organization specializing in business coaching, and American International Mailing, Inc., an alternative mail transporting company, related to charges that the companies falsely claimed they were compliant with the U.S.-EU and U.S.-Swiss Safe Harbor Frameworks.

The FTC’s complaints against TES Franchising and American International Mailing alleged that the companies’ websites indicated that their Safe Harbor certifications were current, when in reality their certifications had expired years prior. In addition, with respect to TES Franchising, the FTC alleged that the company had misrepresented the nature of its Safe Harbor dispute resolution procedures to its customers by stating on its website that disputes would be settled by arbitration in Connecticut with costs split between the consumer and TES Franchising, while indicating in its Safe Harbor certification that disputes would be resolved through the European data protection authorities, which do not require in-person hearings or any costs to consumers.

The U.S.-EU Safe Harbor Framework and the U.S.-Swiss Safe Harbor Framework are cross-border data transfer mechanisms that enable certified organizations to move personal data from the European Union or Switzerland to the United States in compliance with European data protection laws. To join the Safe Harbor Framework, a company must self-certify to the Department of Commerce that it complies with seven privacy principles (notice, choice, onward transfer, security, data integrity, access and enforcement) and related requirements that have been deemed to meet the EU’s adequacy standard.

The proposed settlement agreements would prohibit TES Franchising and American International Mailing from misrepresenting the extent to which each “is a member of, adheres to, complies with, is certified by, is endorsed by, or otherwise participates in any privacy or security program sponsored by the government or any other self-regulatory or standard-setting organization.” TES Franchising is also prohibited from misrepresenting its “participation in, or the rules, processes, policies, or costs of, any alternative dispute resolution process or service, including, but not limited to, arbitration, mediation, or other independent recourse mechanism.”

In the press release accompanying the proposed settlements, FTC Chairwoman Edith Ramirez said that the FTC remains “strongly committed to enforcing the U.S.-EU and U.S.-Swiss Safe Harbor Frameworks” as such cases “send an important message that businesses must not deceive consumers about whether they hold these certifications, and by extension, the ways in which they protect consumers.”

Update:  On May 29, 2015, the FTC announced that it has approved the final settlement orders with TES Franchising and American International Mailing.