Power-Hungry FC Bureaucrats: Defending Small Business against Administrative Overreach
In the Matter of LabMD, Inc.
, FC Docket No. 9357
On August 28, 2013, the Federal rade Commission (FC) issued a complaint against LabMD, a small cancer-detection lab, accusing them o engaging in unspeciﬁed “unreasonable” data security that allegedly violate Section 5 o the FC Act’s prohibition o “unair” trade practices. FC’s investigation orced LabMD to divert time and energy away rom running its business, and the company is now ﬁghting or its lie. On March 20, 2014, Cause o Action and LabMD ﬁled suit in Georgia to stop FC’s overreach. Te FC is attacking LabMD even though data-security practices or health inormation are regulated by the Department o Health and Human Services under the Health Insurance Portability and Accountability Act (HIPAA) and the Health Inormation echnology or Economic and Clinical Health Act (HI-ECH). Neither the FC nor HHS has accused LabMD o violating these laws. No court has ever ruled that FC has this authority and FC has issued no regulations on data-security practices that apply to LabMD. However, the agency is claiming the “administrative common law” o consent orders and Internet postings allows it to go afer anyone, anytime with no prior notice.
Te FC Retaliated Against LabMD when its Owner Exercised his First Amendment Rights and Spoke Out About Teir ainted Investigation.
Almost immediately afer LabMD’s CEO, Michael Daugherty, publicly criticized the FC and posted the trailer to his book, Te Devil Inside the Beltway, on his website, the FC accused LabMD o committing an “unair” trade practice by engaging in “unreasonable” data-security and issued an administrative complaint. Te FC’s administrative complaint relies heavily on allegations concerning an accounts-receivable ﬁle that a third party, iversa, obtained rom LabMD without the company’s knowledge or permission under highly irregular circumstances, even though an FC Commissioner had previously warned FC staﬀ that reliance on that ﬁle could create “the appearance o bias or impropriety.” FC Commissioners and other personnel have repeatedly criticized LabMD in speeches, media interviews, blog posts and press releases. FC staﬀ have asked Mr. Daugherty invasive, irrelevant questions during depositions, including asking about the doors in his home and layout o his basement. Commissioner Julie Brill was orced to recuse hersel afer she made wholly inappropriate comments about LabMD, showing she had already prejudged the outcome o the case.