ALJ DISMISSES FTC CASE AGAINST LABMD

Chief Administrative Law Judge Chappell issued an initial decision in the Federal Trade Commission action against LABMD, Inc., dismissing the case against the now defunct LABMD.   In his decision ALJ Chappell determined that:

“To impose liability for unfair conduct under Section 5(a) of the FTC Act, where there is no proof of actual injury to any consumer, based only on an unspecified and theoretical “risk” of a future data breach and identity theft injury, would require unacceptable speculation and would vitiate the statutory requirement of “likely” substantial consumer injury.”

Many have been following this case as it demonstrates the power of the FTC to enforce federal laws protecting consumer privacy above and beyond the penalties that may be imposed by HIPAA.  There is speculation this decision may focus future FTC case choices on those companies where actual damage is shown as opposed to the possibility of damages.   As noted in previous blogs HIPAA covered entities cannot use HIPAA as a shield against FTC action.

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