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FTC Approves Settlement with Lenovo over Advertising Software Privacy Allegations

The Federal Trade Commission recently announced that it has approved a settlement with Lenovo regarding the company’s alleged, widely-publicized practice of pre-installing an advertising software program on some laptops that caused security vulnerabilities.

The settlement terms include prohibitions regarding the misrepresentation of any features of pre-installed software that would “inject advertising into consumers’ Internet browsing sessions or transmit sensitive consumer information to third parties.”  In the event that Lenovo does pre-install such software, the company is required to contain express consent prior to such software is activated.

The company is also required – for 20 years – to implement a software security program for most consumer software pre-loaded on its laptops.  The program is subject to third-party audits.

Between August 2014 and February 2015, Lenovo laptops allegedly came pre-loaded with software called VisualDiscovery, a program developed by a now-defunct advertising company.    The FTC purportedly found that VisualDiscovery delivered pop-up ads from the ad company’s retail partners whenever a user’s cursor hovered over a similar looking product on a website.

To deliver its ads, according to the Commission, VisualDiscovery acted as a “man-in-the-middle” between consumers’ browsers and the websites they visited, even those websites that were encrypted.  Without the consumer’s knowledge or consent, according to the FTC, this “man-in-the-middle” technique allowed VisualDiscovery to access all of a consumer’s sensitive personal information transmitted over the Internet, including login credentials, Social Security numbers, medical information, and financial and payment information.

The FTC alleges that while VisualDiscovery collected and transmitted to the ad company’s  servers more limited information, such as the websites the user browsed and the consumer’s IP address, the ad company had the ability to collect more information.

As alleged by the agency, to facilitate its display of pop-up ads on encrypted websites (those that include https:// in the web address), VisualDiscovery used an insecure method to replace digital certificates for those websites with its own VisualDiscovery-signed certificates.  Digital certificates are used to signal to a user’s browser that the encrypted websites visited by a consumer are authentic and not imposters.  As alleged in the complaint, VisualDiscovery did not adequately verify that the websites’ digital certificates were valid before replacing them, and used the same, easy-to-crack password on all affected laptops rather than using unique passwords for each laptop.

Because of these security vulnerabilities, consumers’ browsers could not warn users when they visited potentially spoofed or malicious websites with invalid digital certificates, the FTC stated.   The FTC also alleged that the vulnerabilities enabled potential attackers to intercept consumers’ electronic communications with any website, including financial institutions and medical providers, by simply cracking the pre-installed password.  The complaint alleges that Lenovo did not discover these security vulnerabilities because it failed to assess and address security risks created by third-party software it pre-loaded on its laptops.

“Lenovo compromised consumers’ privacy when it preloaded software that could access consumers’ sensitive information without adequate notice or consent to its use,” acting FTC Chairwoman Maureen Ohlhausen said in a statement.  “This conduct is even more serious because the software compromised online security protections that consumers rely on.”

Lenovo said in a statement that it stopped pre-installing the program on devices after questions were raised about privacy violations.  “While Lenovo disagrees with allegations contained in these complaints, we are pleased to bring this matter to a close after 2-1/2 years,” the company said.  “To date, we are not aware of any actual instances of a third party exploiting the vulnerabilities to gain access to a user’s communications.”

Notably, the settlement does not include a fine.

Contact the author if you are interested in learning more about the design and implementation of compliant privacy and data security protocols, or if you are the subject of a regulatory investigation or enforcement action.

Richard B. Newman is an Internet marketing compliance and regulatory defense attorney at Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns, representing clients in investigations and enforcement actions brought by the Federal Trade Commission and state Attorneys General, commercial litigation, advising clients on promotional marketing programs, and negotiating and drafting legal agreements. You can find him on LinkedIn at FTC Defense Lawyer.

 

ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result. Hinch Newman LLP | 40 Wall St., 35thFloor, New York, NY 10005 | (212) 756-8777.

 

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