E.U. Forces American Companies to Play By Its Rules

January 28, 2016

It is no mystery that European Union scrutiny of American companies’ business practices has been increasing over the last year. From the way companies pay taxes to how they display information about individuals online, it seems nothing is escaping the watchful eyes of European regulators. The latest example of this heightened scrutiny concerns how American companies use European consumers’ data and the methods they employ to protect it.

Currently, E.U. and U.S. negotiators are just days away from a January 31st deadline to craft a new Safe Harbor pact to replace the previous framework that was overturned by the European Court of Justice last year. The Safe Harbor agreement regulates the transfer of data from Europe to the United States by multinational companies; however, the decision to overturn it was based on the claim that it was not adequately protecting Europeans’ data privacy. In the months since the Court’s decision, companies have been left scrambling to find legal alternatives, which are often less efficient and more expensive than the previous Safe Harbor approach.

A New York Times article earlier this week explained why reaching an agreement in the negotiation process has been so difficult. Isabelle Falque-Pierrotin, France’s top privacy regulator and leader of a group of European data-protection officials, has emerged as a key E.U. watchdog for how American companies like Facebook and Google protect personal data. According to the article, “Ms. Falque-Pierrotin, empowered by Europe’s highest court, will be at the heart of efforts to police how digital data is transferred outside of the European Union, a central aspect of many European and American businesses. That role will be amplified even further if, as is now widely expected, American and European negotiators fail to reach a new data-transferring deal by Feb. 1.” Ms. Falque-Pierrotin strongly believes that American companies do not have an immediate right to collect data on Europeans and that they need to play by European rules when operating on the continent.

Other signs for concern on this front come from Margrethe Vestager, the European Union’s antitrust chief. Last week she warned that a group of large tech companies could possibly be in violation of the region’s tough competition rules due to their collection of a vast amount of users’ data. As stated by the New York Times, these comments “show that European officials are stepping up their fight to strengthen data protection. In the European Union, an individual’s right to privacy is viewed on par with other fundamental rights like freedom of expression.”

Many sources have reported that the negotiators may not reach a compromise by the end of the month deadline. European officials have threatened that, if their requests are not acknowledged and included in the new Safe Harbor framework, they will start taking enforcement action against companies they feel are violating consumer privacy with their uses of data. European demands for enhanced transparency and data protection apparently have not yet been met to the European regulators’ satisfaction. Time is running out and advertisers need to keep a very close watch on these negotiations.

Stay tuned!

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