Agency Information Collection Activities; Proposed Collection; Comment Request, 2868-2871 [2019-01530]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 84, Number 27 (Friday, February 8, 2019)]
[Notices]
[Pages 2868-2871]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-01530]


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FEDERAL TRADE COMMISSION


Agency Information Collection Activities; Proposed Collection; 
Comment Request

AGENCY: Federal Trade Commission (FTC or Commission).

ACTION: Notice.

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SUMMARY: The information collection requirements described below will 
be submitted to the Office of Management and Budget (OMB) for review, 
as required by the Paperwork Reduction Act (PRA). The FTC seeks public 
comment on its proposal to extend, for three years, the current PRA 
clearance for information collection requirements contained in the 
Health Breach Notification Rule. That clearance expires on March 31, 
2019.

DATES: Comments must be received on or before April 8, 2019.

ADDRESSES: Interested parties may file a comment online or on paper by 
following the instructions in the Request for Comments part of the 
SUPPLEMENTARY INFORMATION section below. Write ``Paperwork Reduction 
Act: FTC File No. P072108'' on your comment, and file your comment 
online at https://www.regulations.gov by following the instructions on 
the web-based form. If you prefer to file your comment on paper, mail 
your comment to the following address: Federal Trade Commission, Office 
of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex J), 
Washington, DC 20580, or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Constitution Center, 
400 7th Street SW, 5th Floor, Suite 5610 (Annex J), Washington, DC 
20024.

FOR FURTHER INFORMATION CONTACT: Robin Wetherill, 202-326-2220, 
Attorney, Privacy & Identity Protection, Bureau of Consumer Protection, 
600 Pennsylvania Ave. NW, Washington, DC 20580.

SUPPLEMENTARY INFORMATION: On February 17, 2009, President Obama signed 
the American Recovery and Reinvestment Act of 2009 (the Recovery Act or 
the Act) into law. The Act included provisions to advance the use of 
health information technology and, at the same time, strengthen privacy 
and security protections for health information. The Act required the 
FTC to adopt a rule implementing the breach notification requirements 
applicable to vendors of personal health records, ``PHR related 
entities,'' and third-party service providers, and the Commission 
issued a final rule on August 25, 2009. 74 FR 42962.
    The Health Breach Notification Rule (Rule), 16 CFR part 318 (OMB 
Control Number 3084-0150), requires vendors of personal health records 
and PHR related entities to provide: (1) Notice to consumers whose 
unsecured personally identifiable health information has been breached; 
and (2) notice to the Commission. Under the Rule, consumers whose 
information has been affected by a breach receive notice ``without 
unreasonable delay and in no case later than 60 calendar days'' after 
discovery of the breach. Among other information, the notices must 
provide consumers with steps they can take to protect themselves from 
harm. To notify the FTC of a breach, the Commission developed a simple, 
two-page form requesting minimal information and consisting mainly of 
check boxes, which is posted at www.ftc.gov/healthbreach. For breaches 
involving the health information of 500 or more individuals, entities 
must notify the Commission as soon as possible, and in any event no 
later than ten business days after discovering the breach. Entities may 
report all breaches involving the information of fewer than 500 
individuals in an annual submission for the calendar year. The 
Commission uses entities' notifications to compile a list of breaches 
affecting 500 or more individuals that is publicly available on the 
FTC's website. The list provides businesses with information about 
potential sources of data breaches, which is helpful to those 
developing data security procedures. It also provides the public with 
information about the extent of data breaches.
    The Rule also requires third-party service providers (i.e., those 
companies that provide services such as billing or data storage) to 
vendors of personal health records and PHR related entities to provide 
notification to such vendors and PHR related entities following the 
discovery of a breach. The Rule only applies to electronic health 
records and does not include recordkeeping requirements.
    These notification requirements are subject to the provisions of 
the PRA, 44 U.S.C. Chapter 35. Under the PRA, federal agencies must get 
OMB approval for each collection of information they conduct, sponsor, 
or require. ``Collection of information'' means agency requests or 
requirements to submit reports, keep records, or provide information to 
a third party. 44 U.S.C. 3502(3); 5 CFR 1320.3(c). As required by 
Section 3506(c)(2)(A) of the PRA, the FTC is providing this opportunity 
for public comment before requesting that OMB extend the existing PRA 
clearance for the information collection requirements associated with 
the Rule.
    The FTC invites comments on: (1) Whether the proposed collection of 
information is necessary for the proper performance of the functions of 
the agency, including whether the information will have practical 
utility; (2) the accuracy of the agency's estimate of the burden of the 
proposed collection of information, including the validity of the 
methodology and assumptions used; (3) ways to enhance the quality, 
utility, and clarity of the information to be collected; and (4) ways 
to minimize the burden of the collection of information on those who 
are to respond. All comments must be received on or before April 8, 
2019.

Burden Estimates

    The PRA burden of the Rule's requirements depends on a variety of 
factors, including the number of covered firms; the percentage of such 
firms that will experience a breach requiring further investigation 
and, if necessary, the sending of breach notices; and the number of 
consumers notified. The annual hours and cost estimates below likely 
overstate the burden because, among other things, they assume, though 
it is not necessarily so, that all covered firms experiencing breaches

[[Page 2869]]

subject to the Rule's notification requirements will be required to 
take all of the steps described below.
    The analysis may also overstate the burden of the Rule's 
requirements because it assumes that covered firms would not take any 
of the steps described were it not for the requirements of the Rule. 
For example, the analysis incorporates labor costs associated with 
understanding what information has been breached. It seems likely that 
some firms would incur such costs even in the absence of the Rule's 
requirements because the firms are independently interested in 
identifying, understanding, and remediating security risks. A company 
that investigates, for its own purposes, what information has been 
breached is unlikely to fully duplicate the costs of that investigation 
in complying with the Rule. Therefore, it may not be correct in all 
cases that complying with the Rule results in added labor costs for 
this activity. Nevertheless, in order to allow for a complete 
understanding of all the potential costs associated with compliance, 
these costs are included in this analysis.
    At the time the Rule was issued in 2009, insufficient data was 
available about the incidence of breaches in the PHR industry. 
Accordingly, staff based its burden estimate on data pertaining to 
private sector breaches across multiple industries. Staff estimated 
that there would be 11 breaches per year requiring notification of 
232,000 consumers.
    In 2016, based on available data from the years 2010 through 2014, 
staff arrived at new estimates, projecting an average of two breaches 
per year affecting a total of 40,000 individual consumers.
    The Rule has now been in effect for over eight years, and new data 
regarding the number and scale of reported breaches from 2015 through 
2017 allow staff to update its burden estimates. A review of the breach 
reports received by the FTC from 2010 through 2017 reveals that there 
are two primary categories of breaches reported: (1) ``single-person 
breaches,'' incidents in which a single individual's information is 
potentially compromised; and (2) what are hereafter described as 
``major breaches,'' in which multiple--and typically, many--individuals 
are affected. These two categories of breaches are addressed separately 
in this analysis because the frequency and costs of the categories 
differ significantly.
    Nearly all of the submissions received between 2010 and 2017--over 
99.99% of them--reported single-person breaches related to an 
individual's loss of control over his or her login credentials. The 
rate of such breaches has increased significantly since the Rule went 
into effect; the year-to-year average rate of increase during this 
period was nearly 70%. Whereas from 2011 to 2014 the average annual 
number of single-person breaches was 7,502, from 2014 to 2017 the 
average was almost 15,000. Assuming that this rate of increase 
continues, staff estimates that between 2019 and 2022 the agency will 
receive, on average, about 25,000 single-person breach reports per 
year.
    By contrast, major breach reports are quite infrequent. On average, 
the FTC receives one major breach report approximately every two and a 
half years, with an average of approximately 200,000 persons affected. 
Given the low frequency at which major breaches occur, FTC staff are 
unable to identify any meaningful trends in the frequency of major 
breach reports. FTC staff has not identified any existing research 
allowing us to make specific projections about future variation in the 
frequency of major breaches. Consequently, FTC staff has assumed that 
the average frequency and scale of major breaches will remain more or 
less static. Staff's calculations are based on the estimate that a 
major breach will occur approximately every two and a half years and 
that 200,000 people will be affected by each major breach, for an 
annual average of 80,000 individuals affected per year.
    Estimated Annual Burden Hours: 4,779.
    As explained in more detail within the next section, FTC staff 
projects that the employee time required for each single-person breach 
is quite minimal because the processes for notifying consumers are 
largely automated and single-person breaches can be reported to the FTC 
in an aggregate annual notification using the FTC's two-page form. On 
average, staff estimates that covered firms will require approximately 
20 seconds of employee labor per single-person breach. With an 
estimated 25,000 single-person breaches per year, the total estimated 
burden hours for single-person breaches is approximately 139 hours.
    For each major breach, covered firms will require on average 100 
hours of employee labor to determine what information has been 
breached, the identification of affected customers, preparation of the 
breach notice, and submission of the required report to the Commission. 
Based on staff's estimate that one major breach occurs every two and a 
half years, the average annual burden of major breaches amounts to 40 
hours per year.
    Additionally, covered firms will incur labor costs associated with 
processing calls they may receive in the event of a major breach. The 
Rule requires that covered firms that fail to contact 10 or more 
consumers because of insufficient or out-of-date contact information 
must provide substitute notice through either a clear and conspicuous 
posting on their website or media notice. Such substitute notice must 
include a toll-free number for the purpose of allowing a consumer to 
learn whether or not his/her information was affected by the breach.
    Individuals contacted directly will have already received this 
information. Staff estimates that no more than 10 percent of affected 
consumers will utilize the offered toll-free number. Thus, of the 
200,000 consumers affected by a major breach, staff estimates that 
20,000 may call the companies over the 90 days they are required to 
provide such access. Staff additionally projects that 10,000 additional 
consumers who are not affected by the breach will also call the 
companies during this period. Staff estimates that processing all 
30,000 calls will require an average of 11,500 hours of employee labor 
resulting in an average annual burden of 4,600 labor hours.
    Given the low frequency of major breaches, the annual average 
requirement for major breaches is 4,640 hours.
    The combined annual hours burden for both single-person and major 
breaches therefore is 4,779 (4,640 + 139).
    Estimated Annual Labor Costs: $91,836.
    For each single-person breach, FTC staff estimates that the average 
20 seconds of employee labor to provide (likely automated) notification 
to affected individuals and produce an annual breach notification for 
submission to the FTC will cost approximately $0.27 per breach. With an 
estimated 25,000 single-person breaches per year, the annual labor 
costs associated with all single-person breaches come to $6,570.
    For major breaches, FTC staff projects that the average 100 hours 
of employee labor costs (excluding outside forensic services, discussed 
below as estimated non-labor costs) to determine what information has 
been breached, identify the affected customers, prepare the breach 
notice, and report to the Commission will cost an average of $61.66 per 
hour for a total of $6,166.\1\

[[Page 2870]]

Based on an estimated one breach every two and a half years, the annual 
employee labor cost burden for affected entities to perform these tasks 
is $2,466.
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    \1\ Hourly wages throughout this document are based on mean 
hourly wages found at https://www.bls.gov/news.release/ocwage.htm 
(``Occupational Employment and Wages--May 2017,'' U.S. Department of 
Labor, released March 2018, Table 1 (``National employment and wage 
data from the Occupational Employment Statistics survey by 
occupation, May 2017'').
    The breakdown of labor hours and costs is as follows: 50 hours 
of computer and information systems managerial time at approximately 
$72 per hour; 12 hours of marketing manager time at $70 per hour; 33 
hours of computer programmer time at $42 per hour; and 5 hours of 
legal staff time at $68 per hour.
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    Additionally, staff expects covered firms will require, for each 
major breach, 11,500 hours of labor associated with answering consumer 
telephone calls at a cost of $207,000.\2\ Since a major breach occurs 
approximately every two and a half years, the average annual burden of 
4,600 labor hours results in annualized labor cost of approximately 
$82,800.
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    \2\ The cost of telephone operators is estimated at $18/hour.
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    Accordingly, estimated cumulative annual labor costs, excluding 
outside forensic services, for both single-person and major breaches, 
is $91,836 ($82,800 + $2,466 + $6,570).
    Estimated Annual Capital and Other Non-Labor Costs: $29,446.
    Commission staff estimates that capital and other non-labor costs 
associated with single-person breaches will be negligible. Companies 
generally use automated notification systems to notify consumers of 
single-person breaches. Automated notifications are typically delivered 
by email or other electronic methods. The costs of providing such 
electronic notifications are minimal.
    Commission staff anticipates that capital and other non-labor costs 
associated with major breaches will consist of the following:
    1. Services of a forensic expert in investigating the breach;
    2. notification of consumers via email, mail, web posting, or 
media; and
    3. the cost of setting up a toll-free number, if needed.
    Staff estimates that, for each major breach, covered firms will 
require 240 hours of a forensic expert's time, at a cumulative cost of 
$34,560 for each breach. This estimate is based on a projection that an 
average major breach will affect approximately 20 machines and that a 
forensic analyst will require about 12 hours per machine to conduct his 
or her analysis. The projected cost of retaining the forensic analyst 
consists of the hourly wages of an information security analyst ($48), 
tripled to reflect profits and overhead for an outside consultant 
($144), and multiplied by 240 hours. Based on the estimate that there 
will be one major breach every two and a half years, the annual cost 
associated with the services of an outside forensic expert is $13,824.
    As explained above, staff estimates that an average of 200,000 
consumers will be entitled to notification of each major breach. Given 
the online relationship between consumers and vendors of personal 
health records and PHR related entities, most notifications will be 
made by email and the cost of such notifications will be minimal.
    In some cases, however, vendors of personal health records and PHR 
related entities will need to notify individuals by postal mail, either 
because these individuals have asked for such notification, or because 
the email addresses of these individuals are not current or not 
working. Staff estimates that the cost of a mailed notice is $0.11 for 
the paper and envelope, and $0.55 for a first class stamp. Assuming 
that vendors of personal health records and PHR related entities will 
need to notify by postal mail 10 percent of the 200,000 customers whose 
information is breached, the estimated cost of this notification will 
be $13,200 per breach. The annual cost will be around $5,280.
    In addition, vendors of personal health records and PHR related 
entities may need to notify consumers by posting a message on their 
home page, or by providing media notice. Staff estimates the cost of 
providing notice via website posting to be $0.08 per breached record, 
and the cost of providing notice via published media to be $0.04 per 
breached record. Applied to the above-stated estimate of 200,000 
affected consumers, the estimated total cost of website notice will be 
$16,000, and the estimated total cost of media notice will be $8,000, 
yielding an estimated total per-breach cost for both forms of notice to 
consumers of $24,000. Annualized, this number is approximately $9,600 
per year.
    Finally, staff estimates that the cost of providing a toll-free 
number will depend on the costs associated with T1 lines sufficient to 
handle the projected call volume and the cost of obtaining a toll-free 
telephone number. Based on industry research, staff projects that 
affected entities may need two T1 lines at a cost of $1,800 for the 90-
day period. In addition, staff estimates the cost of obtaining a 
dedicated toll-free line to be $100 per month. Accordingly, staff 
projects that the cost of obtaining two toll-free lines for 90 days 
will be $2,400. The total annualized cost for providing a toll-free 
number will be $960.
    In sum, the total annual estimate for non-labor costs associated 
with major breaches is $29,664: $13,824 (services of a forensic expert) 
+ $5,280 (cost of mail notifications) + $9,600 (cost of website and 
media notice) + $960 (cost of providing a toll-free number). Negligible 
non-labor costs are associated with single-person breaches.
    The total estimated PRA annual cost burden is $91,836 for labor 
costs and $29,446 for non-labor costs, totaling approximately $121,500.

Request for Comments

    You can file a comment online or on paper. April 9, 2019. Write 
``Paperwork Reduction Act: FTC File No. P072108'' on your comment. 
Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online. To make sure that the Commission considers your 
online comment, you must file it through the https://www.regulations.gov website by following the instructions on the web-
based form provided. Your comment--including your name and your state--
will be placed on the public record of this proceeding, including at 
the https://www.regulations.gov website.
    If you file your comment on paper, write ``Paperwork Reduction Act: 
FTC File No. P072108'' on your comment and on the envelope, and mail 
your comment to the following address: Federal Trade Commission, Office 
of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex C), 
Washington, DC 20580, or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Constitution Center, 
400 7th Street SW, 5th Floor, Suite 5610, Washington, DC 20024. If 
possible, submit your paper comment to the Commission by courier or 
overnight service.
    Because your comment will be placed on the publicly accessible 
website at www.regulations.gov, you are solely responsible for making 
sure that your comment does not include any sensitive or confidential 
information. In particular, your comment should not include any 
sensitive personal information, such as your or anyone else's Social 
Security number; date of birth; driver's license number or other state 
identification number, or foreign country equivalent; passport number; 
financial account number; or credit or debit card number. You are also 
solely responsible for making sure that your comment does not include 
any sensitive health information, such as medical records or other 
individually

[[Page 2871]]

identifiable health information. In addition, your comment should not 
include any ``trade secret or any commercial or financial information 
which . . . . is privileged or confidential''--as provided by Section 
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 
4.10(a)(2)--including in particular competitively sensitive information 
such as costs, sales statistics, inventories, formulas, patterns, 
devices, manufacturing processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular, 
the written request for confidential treatment that accompanies the 
comment must include the factual and legal basis for the request, and 
must identify the specific portions of the comment to be withheld from 
the public record. See FTC Rule 4.9(c). Your comment will be kept 
confidential only if the General Counsel grants your request in 
accordance with the law and the public interest. Once your comment has 
been posted publicly at www.regulations.gov, we cannot redact or remove 
your comment, unless you submit a confidentiality request that meets 
the requirements for such treatment under FTC Rule 4.9(c), and the 
General Counsel grants that request.
    The FTC Act and other laws that the Commission administers permit 
the collection of public comments to consider and use in this 
proceeding as appropriate. The Commission will consider all timely and 
responsive public comments that it receives on or before April 8, 2019. 
You can find more information, including routine uses permitted by the 
Privacy Act, in the Commission's privacy policy, at https://www.ftc.gov/site-information/privacy-policy.

Heather Hippsley,
Deputy General Counsel.
[FR Doc. 2019-01530 Filed 2-7-19; 8:45 am]
 BILLING CODE 6750-01-P