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Why Amazon is Under Fire for Its Zappos Data Breach Deal

A pending settlement by Amazon-owned online retailer Zappos over a seven-year-old data breach underscores how the costs of inadequate cybersecurity may go beyond what’s on the balance sheet.

The preliminary deal, which will go before a federal judge for approval on December 20, brings to an end a protracted class action battle that almost reached the U.S. Supreme Court. And Amazon would walk away without making any monetary payment to victims. Instead, affected Zappos users would receive a one-time 10% sales discount. That’s the problem, according to a growing number of critical online mentions of the Zappos settlement. Various consumer-oriented publications and blogs have slammed the deal, calling it “chintzy” (Slate), “offensive” (LifeHacker) and “everything that’s wrong with class actions and our justice system” (Grit Daily).

As ZDNet notes, the Zappos settlement is the latest in a string of data-breach resolutions that have left victims with effectively “nothing” after the $358.80 cap in the Yahoo settlement and the $125 potential cap in the Equifax settlement. By contrast, attorneys’ costs in the Zappos deal amount to more than $1.6 million.

The discount would be available until December 31, 2019, or within 60 hours of being disseminated to affected customers, whichever is later. A BoingBoing blogger writes, “If the only consequence to expose customer data is increasing Q4 revenue, then there's never going to be any incentive for any company to give a s--- about the personal information of the people who keep them in business.”

The case stems from a January 2012 breach that compromised the personal data of about 24 million Zappos users. Exposed information included names, addresses, passwords and the last four digits of credit card numbers.

Zappos has tried again and again to have the case thrown out, while customers have kept appealing until the 9th U.S. Circuit Court of Appeals eventually sided with the plaintiffs in 2018, denying Zappos’ petition for a rehearing. The U.S. Supreme Court declined a final chance to take up the case in March 2019.

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