Instant Analysis: LifeLock to Pay $113 Million to Settle FTC Allegations

The company is coughing up the money to retire FTC allegations, and a class action lawsuit.

Eric Volkman
Eric Volkman
Dec 22, 2015 at 3:44PM
Technology and Telecom

What happened?
The Federal Trade Commission has approved a settlement agreement with LifeLock (NYSE:LOCK), a purveyor of identity-theft protection services and related offerings. The company will pay a total of $113 million (including $13 million in legal and administrative fees) to settle with the government agency, putting to rest both the FTC's litigation and a pending class action lawsuit. According to the company, $68 million will go to the court overseeing the class action suit and the amount would be "sufficient to fully fund the consumer redress contemplated by the class action settlement." The remaining $32 million is authorized to "fund consumer redress ordered by any state attorneys general, provided that certain conditions are met. If none of that money is used for that purpose, the money would revert to the FTC," the company said. The settlement was announced Dec. 17.

The regulator had accused LifeLock of failing to comply with a 2010 federal court order that mandated the company to properly secure the sensitive personal data of its customers and cease what the FTC termed "deceptive" advertising. Specifically, the FTC alleged that the company falsely advertised that "it protected consumers' sensitive data with the same high-level safeguards used by financial institutions," and that it dishonestly claimed it would send alerts to those customers that might be victims of identity theft "as soon as" it received any indication that the person might be a victim of identity theft.

Does it matter?
The approval comes two months after LifeLock announced that it, the FTC, and the aggrieved class of consumers agreed in principle to the terms of the settlement. The regulator's nod finally puts the matter to rest. For its part, the company effectively maintained that the offending behavior is in the past -- in a statement on the matter, it said that the FTC's ire was raised by "advertisements that we no longer run and policies that are no longer in place." The company also pointed out that there is no indication that any of its customers have had their identity stolen.

It is, of course, a relief for investors that the FTC has accepted the settlement. This should at least support the current stock price, which has nearly doubled from its apparent bottom this past summer (which happened in the wake of the FTC's announcing its intention to take action against the company). The settlement also lifts a negative cloud around LifeLock. On a fundamental basis, the company has actually been doing well, with notably improving revenue, and a bottom line that has landed in the black lately.