Data Points: Privacy & Data Security Blog

Robert Sumner IV and Brandon Gaskins

On April 14, 2016, the European Parliament passed the General Data Protection Regulation (GDPR) and its companion, Data Protection Directive for Police and Criminal Justice Authorities.  The GDPR is a comprehensive regulation that includes new and enhanced privacy rights for European Union (EU) citizens, such as “the right to be forgotten” and the right to object to data processing, including data profiling.  The GDPR also establishes new and heightened obligations for companies doing business in the EU related to the collection, use, and transfer of consumers’ personal data, as well as an enforcement mechanism to ensure compliance.  The European Parliament’s adoption of the GDPR ends more than four years of work on a complete overhaul of EU data protection rules that included thousands of amendments.  The GDPR replaces the current data protection directive 95/46/EC that dates back to 1995.

European Parliament Member Jan Phillip Albrecht (Germany), who played a key role in moving this regulation through Parliament, called the GDPR a “fierce ‘yes’ to strong consumer rights and competition in the digital age” and will also “create clarity for businesses by establishing a single law across the EU.  The new law creates confidence, legal certainty, and fairer competition.”  Prior to the GDPR, each country had its own data and privacy regulations that had to be met, creating significant costs and administrative difficulties for entities doing business throughout the EU.  By replacing the current patchwork of national laws with one uniform EU standard, businesses will have to deal with only one Supervisory Authority (not 28), making it simpler and less expensive for companies to do business in the EU.

U.S. companies doing business in the EU should pay special attention to the following provisions:

• Security of data. The GDPR provides specific data security suggestions, which companies should consider when determining whether adequate security measures are in place (pseudonymisation, encryption, etc.).
• Supervisory Authority. Each company conducting business in the EU must select a single Supervisory Authority to serve as the venue for all matters related to GDPR enforcement.
• Data Protection Officer. Each company conducting business in the EU will select a Data Protection Officer (DPO) who possesses expert knowledge of privacy laws, GDPR compliance, data protection, and other matters relevant to the GDPR.
• Privacy notice to consumers. A party that seeks to collect and/or use a consumer’s personal data must provide a clear privacy notice to the consumer in advance of collection.  The GDRP outlines the information that must be provided to consumers about how their data is processed and the manner in which that information must be presented to the consumer.  This written declaration of rights must be clearly distinguishable from other matters and cannot be grouped with other notices or policies.
• Valid consent required. The GDPR requires that an individual must provide “clear and affirmative consent” for the collection of personal data as well as consent for the purpose(s) for which the data will be used.  Consent must be unambiguous and communicated by a statement or affirmative action.  Under the GDPR, inactivity, silence and pre-ticked boxes cannot constitute consent.  In addition, consumers have the right to withdraw consent at any time and must be able to do so in a manner as easy as it was to give consent in the first place.  For children under the age of 16, consent must be given by the child’s parent or guardian and be verifiable. The burden to prove valid consent falls on the company.
• Notification of data breach. Companies, through their DPO, are required to notify the relevant Supervisory Authority within 72 hours of discovery of any data breach unless it can be shown that the breach is unlikely to pose a risk to individuals.  For high-risk data breaches, companies are also required to notify individuals who are subject of the data breach unless the data was encrypted.  A log of all data breaches, regardless of whether notification is required, must also be maintained.
• Penalties. Penalties for noncompliance can be severe.  A first time offender (non-intentional) might only receive a written warning, but all other violations subject the offender to periodic data protection audits and/or a fine up to 20,000,000€ or up to 4% of the annual worldwide turnover of the preceding financial year in case of a business enterprise, whichever is greater.

Implementation of the GDPR will require changes to business practices for companies that have not implemented a comparable level of privacy protection prior to passage of the new regulation.  The GDPR becomes effective almost immediately, but is not applicable to EU member countries, which have to incorporate the GDPR into their own laws, for two years.  If your company conducts business in the EU, you should review standard operating procedures and processes related to data collection, transfer, and security to determine what action is necessary to comply with the GDPR.  It will be necessary for all businesses conducting business in the EU to implement the necessary enterprise changes before the GDPR goes into effect on May 25, 2018.