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

Cited as:85 FR 41238
Court:Federal Trade Commission
Publication Date:09 Jul 2020
Record Number:2020-14782
Federal Register, Volume 85 Issue 132 (Thursday, July 9, 2020)
[Federal Register Volume 85, Number 132 (Thursday, July 9, 2020)]
                [Pages 41238-41241]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2020-14782]
                [File No. 182 3189]
                RagingWire Data Centers, Inc.; Analysis To Aid Public Comment
                AGENCY: Federal Trade Commission.
                ACTION: Proposed Consent Agreement; Request for Comment.
                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
                 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,
                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
                [[Page 41240]]
                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.
                 \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.
                Dissenting Statement of Commissioner Rohit Chopra Regarding the EU-U.S.
                Privacy Shield Framework in the Matter of NTT Global Data Centers
                Americas, Inc.
                 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\
                 \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.
                 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
                [[Page 41241]]
                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
                 \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
                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\
                 \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.
                 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.
                 \4\ See Declaration of Christopher Ghazarian, NTT Global Data
                Centers Americas, Inc., Docket No. 9386 (Dec. 20, 2019).
                 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\
                 \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.
                 For these reasons, I respectfully dissent.
                [FR Doc. 2020-14782 Filed 7-8-20; 8:45 am]
                BILLING CODE 6750-01-P