On November 17, 2014, the Federal Trade Commission announced that data privacy certifier True Ultimate Standards Everywhere, Inc. (“TRUSTe”) has agreed to settle charges that the company deceived consumers about its recertification program and misrepresented that it was a non-profit entity in violation of Section 5 of the FTC Act.

TRUSTe offers a variety of assessments and certifications (“Certified Privacy Seals”) for online business websites and mobile applications. The Certified Privacy Seals are based on meeting certain standards related to the transparency of the company’s data practices and the choices available to consumers regarding the collection and use of their personal information. The Certified Privacy Seals help assure consumers that TRUSTe clients are compliant with privacy standards such as the Children’s Online Privacy Protection Act and the U.S.-EU Safe Harbor Framework.

In its complaint against TRUSTe, the FTC alleged that from 2006 to January 2013, the company failed to conduct an annual review of its clients’ compliance with TRUSTe’s Certified Privacy Seals requirements in over 1,000 instances. The FTC also accused TRUSTe of misrepresenting its corporate status by recertifying numerous clients that referred to TRUSTe as a non-profit entity after it became a for-profit company in July 2008.

In the proposed consent order, TRUSTe agreed to (1) a number of requirements and restrictions related to its Certified Privacy Seals program and (2) pay $200,000. Under the consent order, the company must provide the FTC with an annual sworn statement during the next 10 years containing information about its certification programs, including the total number of new seals awarded and detailed explanations of its certification criteria. The consent order also prohibits the company from misrepresenting its certification process, the certification of its clients or its corporate status.

“TRUSTe promised to hold companies accountable for protecting consumer privacy, but it fell short of that pledge,” said FTC Chairwoman Edith Ramirez. “Self-regulation plays an important role in helping to protect consumers…But when companies fail to live up to their promises to consumers, the FTC will not hesitate to take action.”

Update: On March 18, 2015, the FTC approved the final settlement order with TRUSTe.