WWD.com/business-news/financial/american-apparel-settles-ftc-charges-7764219/
government-trade
government-trade

American Apparel Settles FTC Charges

Under the settlement, the company is prohibited from misrepresenting its participation in any privacy or data security program sponsored by the government.

Shares of American Apparel rebounded 28.7 percent to 68 cents Wednesday — giving the company a market capitalization of $118 million.

This story first appeared in the June 26, 2014 issue of WWD.  Subscribe Today.

The stock’s been particularly volatile since the company’s board ousted founder Dov Charney as president, chief executive officer and chairman last week.

Charney’s contesting his firing in arbitration and his lawyers are said to believe he has grounds to claim $23 million to $25 million for unfair dismissal.

The company, meanwhile, is pushing ahead, looking for a new ceo and has engaged Peter J. Solomon Co. to help it secure additional funding, if necessary.

On another front, the Federal Trade Commission said Wednesday it has approved a final order settling charges against American Apparel Inc. for falsely claiming to participate in international privacy frameworks.

Under the settlement, American Apparel is prohibited from misrepresenting its participation in any privacy or data security program sponsored by the government or any other self-regulatory or standard-setting organization. According to a complaint filed by the FTC, the Los Angeles-based retailer violated the Federal Trade Commission Act by claiming it held current certifications under the U.S.-European Union and U.S.-Swiss Safe Harbor Frameworks even though the certifications had lapsed between June and December 2013.

The safe-harbor frameworks provide a method for U.S. companies to lawfully transfer personal data outside of Europe that is consistent with the requirements of the EU Directive on Data Protection, which sets EU requirements for privacy and protection of personal data. To participate, a company must self-certify annually to the U.S. Department of Commerce that it complies with the seven privacy principles required to meet the EU’s adequacy standard: notice, choice, onward transfer, security, data integrity, access and enforcement.

According to the order, American Apparel is required to maintain for five years any advertising, promotional matter or other statements regarding its certification and provide it to the FTC on request. The order will stay in place for 20 years.

The company must also notify the FTC at least 30 days prior to any changes in the corporation that could affect compliance such as dissolution, sale, merger or a proposed bankruptcy filing. It must also file with the FTC a report in writing within 60 days, stating its compliance with the order.

An FTC spokesman said the penalty for a violation of an FTC order is up to $16,000 for each violation per day.