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FTC Launches Investigation Of T.J. Maxx Parent Company




FTC Launches Investigation Of T.J. Maxx Parent Company
FTC Launches Investigation Of T.J. Maxx Parent Company



http://www.informationweek.com/news/showArticle.jhtml?articleID=198000608 

By Larry Greenemeier
InformationWeek
March 13, 2007

The U.S. Federal Trade Commission Tuesday confirmed that it has launched 
an investigation of TJX, the parent company of T.J. Maxx, Marshalls, 
HomeGoods, and other stores. While the FTC wouldn't reveal the nature of 
the investigation or when it began, it's likely the result of a large 
data breach that allowed cyberintruders to steal customer data.

Should TJX be worried? During the past few years, ChoicePoint showed 
everyone just how much power the FTC wields. That company wound up 
paying $10 million in civil penalties and $5 million in customer redress 
after it handed over consumers' names, addresses, Social Security 
numbers, and credit reports to fraudsters working out of Los Angeles 
County. But the monetary penalty is just the beginning, says Jo Anne 
Adlerstein, an attorney with Thelen Reid Brown Raysman & Steiner LLP. 
ChoicePoint also had to implement a new IT security system, and their 
security systems will be audited every two years for the next 20 years. 
If TJX is found to be in violation of privacy laws, "it will be the 
beginning of an ongoing relationship with the FTC," she says.

The FTC's investigation of TJX should put all companies that handle 
customer data on notice. "Companies must think in terms of, 'What if the 
FTC stops by to see me tomorrow? What will they find?'" Adlerstein says.

Neither TJX nor investigators have revealed just how many data records 
were compromised or how much fraud has been committed against using 
these data records, but the company recently revealed that the first 
intrusion most likely took place starting July 2005. The company also 
believes that credit and debit card transactions at its United States, 
Puerto Rico, and Canada stores from January 2003 through June 2004 -- 
excluding debit card transactions with cards issued by Canadian banks -- 
were compromised. Even worse, a number of documents sent by Visa to 
financial institutions that issue cards and manage Visa transactions 
indicate TJX was storing credit and debit card data in violation of the 
Payment Card Industry Data Security Standard created by Visa and 
MasterCard.

Both banks and retailers will be paying close attention to the FTC's 
investigation for the ramifications it may have on which of them 
ultimately bears the cost of a customer data breach. "We're looking for 
the FTC to put some weight on the issue and keep the [credit and debit 
card] issuer banks from absorbing the cost," says J. B. Rambaud, senior 
VP and chief security and risk officer for financial services industry 
technology provider Fiserv EFT.

Not that the investigation into the data breach has slowed down TJX. The 
company last week reported February sales were $1.2 billion, up 6% over 
the sales figures for the same period a year ago. Identity theft is a 
serious matter, but so is a good bargain.


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