LifeLock shares took a hit on Tuesday (July 21) after the Federal Trade Commission said that same day that the data security company failed to deliver on its pledges to safeguard consumer data or honor a five-year-old regulatory sanction that disallowed false claims tied to its services.
As has been featured in advertisements spanning various media, from radio to television to the Internet, LifeLock has said that it protects consumers’ identities 24 hours a day, seven days a week, 365 days a year. The business model has in part been predicated on the promise by management that it alerts subscribers “as soon as" indications of data issues arose. And in one of its most famous advertising staples, LifeLock even posted its CEO’s Social Security number as testament to the reach and breadth of its data protection services.
Yet the FTC said this week that LifeLock “falsely claimed,” from October 2012 through March 2014, that its data protection was on par with services provided by larger financial institutions. And, noted the Commission, LifeLock violated the 2010 order mandating that the company establish and maintain a “comprehensive” program to safeguard Social Security, bank account and credit card numbers.
New charges by the FTC state that LifeLock should rebate consumers harmed by the aforementioned “false promises.”
On the heels of the FTC’s claims, shares in LifeLock plunged over 48 percent to about $8 in Tuesday’s trading before rebounding a bit on Wednesday.
In response to the FTC announcement, LifeLock stated that it would challenge the agency’s claims.
“After more than 18 months of cooperation and dialogue with the FTC, it became clear to us that we could not come to a satisfactory resolution of their issues outside a court of law. We disagree with the substance of the FTC’s contentions and are prepared to take our case to court,” the company said in a statement.
The company stated in the release that the FTC is “not seeking any relief that would change LifeLock services and products going forward,” with the FTC claims centered on past, rather than current, business practices.