Marriott data breach

ICO hands down fine of £99.2 million to Marriott International for GDPR breach

Executive summary

No sooner has the ICO announced its intention to hit BA with a significant fine for breaches of the GDPR, the very next day, Tuesday 9 July, it announced it was doing the same thing to the hotelier Marriott International, this time to the tune of £99.2 million. The proposed fine relates to a breach of the hotel reservation system which Marriot reported to the ICO in November 2018. The affected data included a variety of personal data contained in approximately 339 million guest records relating to residents of 31 countries in the European Economic Area. Seven million related to UK residents. The ICO has taken on the role of lead supervisor on behalf of the other EU Member State regulators.

The facts

On 8 September 2018 Marriott received information that an alert from an internal security tool was related to an attempt to access the Starwood guest reservation database. Following the engagement of security experts Marriott learned that there had been unauthorized access to the Starwood network since 2014. Marriott determined that a criminal actor had copied and encrypted information and took steps to remove it. On 19 November 2018 Marriott was able to decrypt the information and determined that it was from the Starwood guest reservation database.

The data copied over time included information about guests who made a reservation at a Starwood property including names, mailing addresses, phone numbers, email addresses, passport numbers, Starwood Preferred Guest account information, dates of birth, gender, arrival and departure information, reservation dates and communication preferences. The information copied also included approximately 9.1 million encrypted payment card numbers and payment card expiration dates. According to Marriott the encryption had two components to decrypt the card details and there was no evidence the criminal actor had accessed either component. However, Marriott believes several thousand unencrypted payment card numbers had been copied.

Marriott and other EU member states’ regulatory authorities now have 28 days to make representations. Marriott has already stated that it intends to respond and vigorously defend its position with the President and CEO, Arne Sorenson, saying:

“We are disappointed with this notice of intent from the ICO, which we will contest. Marriott has been cooperating with the ICO throughout its investigation into the incident, which involved a criminal attack against the Starwood guest reservation database.
“We deeply regret this incident happened. We take the privacy and security of guest information very seriously and continue to work hard to meet the standard of excellence that our guests expect from Marriott.”

However the Information Commissioner, Elizabeth Denham, has already gone on record to defend the fine saying:

“The GDPR makes it clear that organisations must be accountable for the personal data they hold. This can include carrying out proper due diligence when making a corporate acquisition, and putting in place proper accountability measures to assess not only what personal data has been acquired, but also how it is protected.
“Personal data has a real value so organisations have a legal duty to ensure its security, just like they would do with any other asset. If that doesn’t happen, we will not hesitate to take strong action when necessary to protect the rights of the public.”

Comment

The level of fine represents approximately 3% of Marriott’s $3.6 billion revenue from 2018. The ICO clearly feels this breach is therefore worse than BA’s given the intended fine there is approximately 1.5% of turnover. Given the number of different types of data and the volume this is perhaps not unexpected. It is interesting that these two significant fines have been announced on consecutive days. This may well be deliberate to maximise effect, show the power it now has and seek to drive the importance of data and the security of it home.

There are two other points of note. The first is the comment from the Information Commissioner about due diligence in corporate transactions which should include interrogating the cyber integrity of the target business. But how do you protect against the fact the systems may have been breached? Will a target business allow a potential buyer to snoop around its network? If not due diligence is restricted to questions on systems and procedures. Seeking warranties and indemnities against a pre-purchase breach may sound like a good idea for the buyer but with the potential level of fines and claims will the seller really be willing to grant them?

The other aspect is that the initial breach occurred long before the GDPR came into effect on 25 May 2018, albeit that it continued afterwards. Some commentators had considered that, if the initial breach occurred before implementation of the GDPR, the old Data Protection Act 1998 would apply. That door seems shut. Indeed, the GDPR is clear that notification to the ICO which is now mandatory is dependent upon knowledge of the breach and doesn’t link it to the date of the breach event itself. It would make no sense to insist that some of the GDPR rules apply but not others.

If ever there was a time to review your data security policies and procedures, this is it. Having a cyber insurance policy will certainly help, but an ounce of prevention is worth a pound of cure. A pro-active approach to GDPR compliance will help prevent any issues from occurring in the first place and put you in a better position to respond in the event a data breach or other data event occurs. Through our innovative CyXcel product, we can assist with all aspects of data breach preparedness including drafting policies and procedures, preparing a data breach response plan through to resilience and penetration testing through our team of carefully selected partner organisations.

If you would like to know more about our update or have any questions, please contact Mark Brenlund (Partner), or William Healy (Solicitor) on 0208 036 6970, or william.healy@weightmans.com.

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