United States: FTC Issues Report And Privacy Best Practices For The Internet of Things

Last Updated: February 19 2015
Article by Rohit Dave

On January 27, 2015 the Federal Trade Commission (the "FTC") issued a report detailing best practices and recommendations that businesses engaged in the Internet of Things ("IoT") can follow to protect consumer privacy and security. The IoT refers to the connection of everyday objects to the Internet and the transmission of data between those devices. According to Gartner estimates the IoT services spending will reach $69.5 billion in 2015. The potential benefits of IoT growth include enhanced healthcare through connected medical devices, convenience and cost savings through home automation and improved safety and convenience through connected cars.

In the report the FTC expresses concern about both security and privacy risks associated with the IoT. It identified three primary security risks: (i) the increased number of Internet connected devices increases the number of network vulnerabilities and creates greater possibility of unauthorized access and misuse of personal information; (ii) the proliferation of devices can facilitate attacks on other systems, such as through denial of service attacks; and (iii) the exploitation of vulnerabilities on devices and networks can create risks to personal and physical safety, particularly with regard to healthcare related connected devices, such as smart pacemakers and insulin pumps. According to the report, the inexperience of some IoT companies and the disposable, low-cost nature of many IoT devices exacerbate security issues because of the lower incentive and ability to provide support, patches and encryption for the devices.

Additionally, according to the FTC, the new types and massive amounts of data capture enabled by the IoT present consumers with increased risk to their privacy. Such data can be paired with other available data to infer and tie more sensitive information to individual consumers, such as financial, health and private home behavioral information. The vast amount of data collected by IoT devices may be used behind the scenes in ways that are inconsistent with the context of the interaction between the consumer and the device company. For example, a consumer's health data from a wearable device could be sold to a data brokerage for advertising purposes, resulting in a use of the recorded consumer behavioral data that is inconsistent with the context of the consumer's relationship with the manufacturer.

The report generally supports the application of the FTC's long-standing Fair Information Practice Principles to the IoT ecosystem. These principles include data security, data minimization and consumer notice and choice.

Data Security

First, the FTC endorses a "security by design" approach to the IoT. Such an approach emphasizes a design process that from the outset includes (i) conducting a privacy or security risk assessment, (ii) implementing smart defaults (e.g., password changes) and (iii) testing security measures before product launch (e.g., testing to ensure backdoors or easy access points have been closed).

Second, the FTC recommends that companies properly train employees on product security and promote security within the organization. One suggestion includes dedicating senior level attention to security so that the prioritization of security permeates throughout the company.

Third, companies must retain service providers capable of maintaining reasonable security practices.

Fourth, the FTC supports a "defense-in-depth" approach. This approach addresses significant risks and vulnerability by the adoption of security measures and encryption at several different levels or at multiple data transit points within the IoT ecosystem, especially withinin consumer home networks.

Fifth, the report promotes the implementation of reasonable access controls. This security measure requires strong authentication.

Finally, according to the report, adequate security for the IoT requires monitoring products throughout their lifecycles and releasing patches or updates as necessary.

Data Minimization

Data minimization is a long-standing concept in privacy protection and refers to the practice that companies limit the data they collect to that which needs to be collected for the stated purpose and dispose of it once it has served such purpose. According to the FTC, in the IoT context the danger of large data stores attracting hackers and thieves and the increased risk of data being used against consumer expectations emphasizes the importance of data minimization.

Some commenters challenge the minimization concept because it might prevent the collection of data with potentially valuable future uses and thereby inhibit the growth of the IoT industry, but the FTC suggests that such data could be collected at that future time when the value of that data can actually be realized. The FTC argues for a flexible approach in which companies can (i) decide not to collect data at all, (ii) collect only the fields of data necessary to the product or service being offered, (iii) collect data that is less sensitive or (iv) de-identify the data they collect. When following a de-identified data strategy, the FTC tells companies to ensure that the data cannot be reasonably re-identified both using technical measures and contractual preclusions imposed on third parties with whom they share data.

Notice and Choice

The FTC still considers a consumer notice and choice approach to be the best practice even in the IoT context. In this conventional approach companies give consumers prior notice about privacy and data sharing practices, and consumers have the option to opt-out or give consent to the practice. However, the FTC provides some flexibility to this practice by recognizing and incorporating into its recommendations some elements of a use-based approach. A use-based approach takes into account the context to determine whether a certain data use is consistent with consumer expectations. If the use is consistent with expectations, the company may not need to offer consumers a choice, but if the use is an inconsistent or unexpected use of data, the company should give consumers a clear and conspicuous choice.

The FTC incorporates this flexibility in recognition of the ubiquity of data collection in the IoT context, which could make a constant notice and choice strategy cumbersome for companies and consumers alike, and the alternative user interfaces that accompany IoT devices. Elements of a use-based approach already exist in current regulatory schemes, such as the Fair Credit Reporting Act, which creates certain permissible and impermissible uses of data. However, the FTC has concerns about adopting a solely use-based model because (i) it would be unclear who would determine whether a certain use of data is consistent with consumer expectations (e.g., the companies or consumers); (ii) the ubiquity of data and related privacy and security risks would remain; and (iii) it would not take into account or regulate the collection of sensitive information when it is not shared.

These concerns motivate the FTC's general endorsement of a continued notice and choice regime even within the IoT ecosystem. The FTC offers alternative methods to present consumers with their choices: offering tutorials, codes or icons linking to more detailed information or choice at points of sale, during device set up, in management dashboards, in dedicated privacy menus, in alerts and notifications or on other connected devices with easier to read user interfaces.

Finally, because the FTC recognizes that there may be pushback that early regulation could stunt the growth of this potentially huge, innovative market, the FTC recommends that Congress enact broad, technology-neutral privacy and data security legislation and counters that consumer trust in the network and technology is just as crucial for the widespread adoption of the IoT. As an example of such technology-neutral regulation, the FTC cites existing data breach notification rules as easily applicable to the IoT ecosystem.


Exactly how the FTC will enforce these new recommendations remains to be seen. The FTC does have authority to take action against some IoT-related practices but cannot mandate certain privacy protections without a specific showing of deception or unfairness. For example, in its action against TRENDnet, Inc., the FTC's first IoT case, the FTC alleged that the company's Internet-enabled home security and baby monitoring cameras were falsely described as secure. The FTC's investigation of the company started after hundreds of consumers' private camera feeds leaked onto the Internet. In January 2014, the FTC executed a consent order in which the company agreed, among other things, (i) not to misrepresent the security of its devices and consumers' ability to control the security of the information transmitted by the company's devices, (ii) to notify customers about the security issues with the cameras and availability of software to update them and (iii) to establish a comprehensive security program. The TRENDnet, Inc. example serves as both validation of the FTC's concerns about the IoT and as a potential prototype for how the FTC may handle future enforcement actions within the IoT context.

FTC Issues Report and Privacy Best Practices for the Internet of Things

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Skadden, Arps, Slate, Meagher & Flom (UK) LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Skadden, Arps, Slate, Meagher & Flom (UK) LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions