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

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FTC Launches Investigation Of T.J. Maxx Parent Company

The Federal Trade Commission's look into TJX, parent of T.J. Maxx, Marshalls, and HomeGoods, is believed to stem from a recent data breach, which allowed cyberintruders to steal customer data.

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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