Court Upholds FTC's Power To Sue Hacked Companies

The Federal Trade Commission has the power to sue companies that fail to protect their customers' data, a federal court in New Jersey said.

The ruling shoots down a challenge from Wyndham Hotels, which argued that the FTC overstepped its authority with a 2012 lawsuit against the global hotel chain. The decision by US District Court Judge Esther Salas is a major win for the agency. If the court had sided with Wyndham, it would have stripped the federal government of oversight of data security practices just as hackers begin to pull off more and more high-profile attacks.

Judge Salas said her decision "does not give the FTC a blank check to sustain a lawsuit against every business that has been hacked," but that she must follow the "binding and persuasive precedent" to uphold the agency's authority. The FTC is currently investigating Target over the massive hack that exposed information on 40 million credit cards.