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###### Federal Trade Commission

          - [File No. 032 3221] 

# AGENCY:

Federal Trade Commission. 

# ACTION:

Proposed Consent Agreement.

# SUMMARY:

The consent agreement in this matter settles alleged violations of federal law prohibiting unfair or deceptive acts or practices or unfair methods of competition. The attached Analysis to Aid Public Comment describes both the allegations in the draft complaint that accompanies the consent agreement 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 December 15, 2004. 

# ADDRESSES:

                        Comments should refer to “Petco Animal Supplies, Inc., File No. 032 3221,” to facilitate the organization of comments. A comment filed in paper form should include this reference both in the text and on the envelope, and should be mailed or delivered to the following address: Federal Trade Commission/Office of the Secretary, Room H-159, 600 Pennsylvania Avenue, NW., Washington, DC 20580. Comments containing confidential material must be filed in paper form, as explained in the                         **SUPPLEMENTARY INFORMATION**                         section. The FTC is requesting that any comment filed in paper form be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions. Comments filed in electronic form (except comments containing any confidential material) should be sent to the following e-mail box:                         *consentagreement@ftc.gov.*

# FOR FURTHER INFORMATION CONTACT:

Alain Sheer, FTC, Bureau of Consumer Protection, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 326-3321. 

# SUPPLEMENTARY INFORMATION:

                    Pursuant to Section 6(f) of the Federal Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Section 2.34 of the Commission's Rules of Practice, 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 Home Page (for November 17, 2004), on the World Wide Web, at “                    *http://www.ftc.gov/​os/​2004/​11/​index.htm.*                    ” A paper copy can be obtained from the FTC Public Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., Washington, DC 20580, either in person or by calling (202) 326-2222.                 

                    Public comments are invited, and may be filed with the Commission in either paper or electronic form. Written comments must be submitted on or before December 15, 2004. Comments                           ( print page 68150)                        should refer to “Petco Animal Supplies, Inc., File No. 032 3221,” to facilitate the organization of comments. A comment filed in paper form should include this reference both in the text and on the envelope, and should be mailed or delivered to the following address: Federal Trade Commission/Office of the Secretary, Room H-159, 600 Pennsylvania Avenue, NW., Washington, DC 20580. If the comment contains any material for which confidential treatment is requested, it must be filed in paper (rather than electronic) form, and the first page of the document must be clearly labeled “Confidential.” [1]                                          The FTC is requesting that any comment filed in paper form be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions. Comments filed in electronic form should be sent to the following e-mail box:                     *consentagreement@ftc.gov.*

                    The FTC Act and other laws the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. All timely and responsive public comments, whether filed in paper or electronic form, will be considered by the Commission, and will be available to the public on the FTC Web site, to the extent practicable, at                     *http://www.ftc.gov.*                     As a matter of discretion, the FTC makes every effort to remove home contact information for individuals from the public comments it receives before placing those comments on the FTC Web site. More information, including routine uses permitted by the Privacy Act, may be found in the FTC's privacy policy, at                     *http://www.ftc.gov/​ftc/​privacy.htm.*

## Analysis of Proposed Consent Order To Aid Public Comment 

The Federal Trade Commission has accepted, subject to final approval, a consent agreement from Petco Animal Supplies, Inc. (“Petco”). 

The consent agreement 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. 

                    Petco is a national retailer that sells pet food, pet supplies, and pet services from over 600 stores throughout the United States. It also sells pet food and supplies through its online store at                     *http://www.PETCO.com.*                     This matter concerns alleged false or misleading representations Petco made to consumers about the security of personal information collected through its online store.                 

                    The Commission's proposed complaint alleges that Petco represented that personal information it obtained from consumers through                     *http://www.PETCO.com*                     was stored in an encrypted format and therefore was not accessible to anyone except the consumer that provided the information. The complaint alleges this representation was false because a commonly known attack on its Web site could and was used to gain access in clear readable text to personal information, including credit card numbers and expiration dates, that Petco obtained from consumers.                 

The proposed complaint also alleges that Petco represented that it implemented reasonable and appropriate measures to protect the personal information it obtained through the website against unauthorized access. The complaint alleges this representation was false because Petco did not implement reasonable and appropriate measures to detect common vulnerabilities and prevent them from being exploited. 

The proposed order applies to Petco's collection and storage of personal information from or about consumers in connection with its online business. It contains provisions designed to prevent Petco from engaging in the future in practices similar to those alleged in the complaint. 

Specifically, Part I of the proposed order prohibits Petco, in connection with online advertising, marketing, promotion, offering for sale, or sale of any product or service, from misrepresenting the extent to which it maintains and protects the security, confidentiality, or integrity of any personal information collected from or about consumers. 

Part II of the proposed order requires Petco to establish and maintain a comprehensive information security program in writing that is reasonably designed to protect the security, confidentiality, and integrity of personal information collected from or about consumers. The security program must contain administrative, technical, and physical safeguards appropriate to Petco's size and complexity, the nature and scope of its activities, and the sensitivity of the personal information collected from or about consumers. Specifically, the order requires Petco to: 
    - Designate an employee or employees to coordinate and be accountable for the information security program.
    - Identify material internal and external risks to the security, confidentiality, and integrity of consumer information that could result in unauthorized disclosure, misuse, loss, alteration, destruction, or other compromise of such information, and assess the sufficiency of any safeguards in place to control these risks. At a minimum, this risk assessment should include consideration of the risks in each area of relevant operation.
    - Design and implement reasonable safeguards to control the risks identified through risk assessment, and regularly test or monitor the effectiveness of the safeguards' key controls, systems, and procedures.
    - Evaluate and adjust its information security program in light of the results of testing and monitoring, any material changes to its operations or business arrangements, or any other circumstances that Petco knows or has reason to know may have a material impact on the effectiveness of its information security program.

Part III of the proposed order requires that Petco obtain within 180 days after being served with the final order approved by the Commission, and on a biennial basis thereafter, an assessment and report from a qualified, objective, independent third-party professional, certifying, among other things, that: (1) Petco has in place a security program that provides protections that meet or exceed the protections required by Part II of the proposed order, and (2) Petco's security program is operating with sufficient effectiveness to provide reasonable assurance that the security, confidentiality, and integrity of consumers' personal information has been protected. 

                    Parts IV through VII of the proposed order are reporting and compliance provisions. Part IV requires Petco to retain documents relating to compliance. It requires Petco to retain most documents for a five-year period; assessments and supporting documents, however, must be retained for three years after the date when each assessment is prepared. Part V requires dissemination of the order now and in the future to persons with                           ( print page 68151)                        responsibilities relating to the subject matter of the proposed order. Part VI requires Petco to notify the Commission of changes in Petco's corporate status. Part VII mandates that Petco submit compliance reports to the FTC. Part VIII is a provision “sunsetting” the order after twenty (20 ) years, with certain exceptions.                 

The purpose of this analysis is to facilitate public comment on the proposed order. It is not intended to constitute an official interpretation of the proposed order to modify its terms in any way. 

By direction of the Commission. 

Donald S. Clark, 

Secretary. 

# Footnotes

1.                             Commission Rule 4.2(d), 16 CFR 4.2(d). The comment must be accompanied by an explicit request for confidential treatment, including the factual and legal basis for the request, and must identify the specific portions of the comment to be withheld from the public record. The request will be granted or denied by the Commission's General Counsel, consistent with applicable law and the public interest. See Commission Rule 4.9(c), 16 CFR 4.9(c).                    
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[FR Doc. 04-25935 Filed 11-22-04; 8:45 am] 

BILLING CODE 6750-01-P