Regulators without borders
Digital Politics is a column about the global intersection of technology and the world of politics.
LONDON — The borderless internet can cut both ways.
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The frontier-free nature of the web allowed American tech giants like Google, Amazon and Facebook to become some of the world’s most valuable companies, expanding almost effortlessly from their West Coast headquarters to the four corners of the planet.
Now, Silicon Valley’s elite are finding out that two can play at that game. Regulators in Europe — where privacy rules are among the strictest in the world — are turning the borderless internet to their advantage, aggressively extending their data protection standards far beyond the boundaries of the European Union.
That dynamic will be on full display in Washington this week when the EU Commissioner for Justice Věra Jourová and U.S. Commerce Secretary Wilbur Ross sit down to haggle over small changes to the EU-U.S. Privacy Shield, which regulates how companies must treat people’s data as it flows across the Atlantic.
No one expects fireworks from the negotiations. Both the Commission and Commerce are eager to show that Privacy Shield has been a success. (You’ll hear a lot about the approximately 2,500 companies that have already signed up.)
The digital flows covered by the new rules represent hundreds of billions of dollars of annual trade and ensure that corporate payroll information, industry safety checks — as well as people’s Google queries and Facebook posts — can smoothly move between arguably the world’s largest consumer markets.
But underlying the press conferences and high-level talks in Washington is a realization that the die already has been cast: Companies like Google and Facebook cannot hope to freely expand beyond the United States while not expecting European regulators to follow suit.
The borderless web may have helped them climb to the top of the digital food chain. But it also has left them increasingly vulnerable to Europe’s ever-expanding online rules.
“Privacy Shield must protect Europeans’ rights in the United States,” Jourová told me in an interview in July. “I don’t want to see any changes in the U.S. that would worsen that.”
The outcome of Privacy Shield (after years of negotiations between EU and American officials) is another example of how Europe — despite a lack of homegrown tech superstars — has become the world’s de facto privacy regulator, relegating the United States to an also-ran when deciding how digital giants should collect, use and monetize the data they gather from San Francisco to Stockholm to Singapore.
“Europe is leading the way in various privacy issues,” Isabelle Falque-Pierrotin, France’s data protection chief, said in an interview earlier this year.
“It wouldn’t be good to have the digital environment fragmented along regional boundaries,” added Falque-Pierrotin, who already has slapped Google and Facebook with (small) fines for privacy violations, and is an eager proponent of exporting Europe’s data protection rules worldwide. “We want to converge on international standards.”
France’s privacy watchdog has called for the so-called right to be forgotten (an EU-wide rule that allows people to ask search engines for links about themselves to be removed online, under certain circumstances) to apply globally.
Ireland’s data protection authority — which is the primary overseer for Facebook’s roughly 1.8 billion non-North American users — has forced the social networking giant to alter how it handles people’s data, including those in the United States.
And under new rules that take effect early next year, EU policymakers will be able to fine companies (anyone who has European customers, even if the business is not based in the region) up to 4 percent of global revenue or €20 million, whichever is greater, if they flout the region’s standards.
For sure, it’s not like the U.S. doesn’t have some privacy protections. The Fourth Amendment, for instance, dates back to 1792. American regulators like the Federal Trade Commission also have doled out multimillion dollar fines that make European financial penalties of a couple hundred thousand euros, on average, look like chump change. European complaints about U.S. intelligence agencies’ spying activities run somewhat hollow as EU member countries often do the same.
But on the big-ticket privacy issues — those that will take on increasing relevance as our smartphone-centric lives create wave upon wave of digital information — the U.S. remains behind the curve.
A long-awaited Privacy Bill of Rights, promoted by President Barack Obama, continues in legislative limbo. And after a recent data breach at Equifax, the U.S. credit agency, in which personal data from almost half of the U.S. population may have been stolen, American data protection laws are starting to look woefully out of date.
Europe’s eagerness to set de facto worldwide standards does not come without its critics. Many inside the tech industry bemoan the Continent’s conservative approach to privacy. And the region’s regulators — unelected and mostly unknown bureaucrats — have frequently been accused of overreach in slapping tech giants with fines.
Yet those critics are likely to be increasingly disappointed, as the Continent’s gung-ho attitude to privacy becomes compounded as more and more countries, from Colombia to South Africa, fall in line with the region’s tough rules that view privacy — roughly — on par with other fundamental rights like freedom of speech and expression.
By complying with Europe’s rules, local regulators argue, their countries can more easily sell goods and services to Europe’s 500 million wealthy consumers as they already meet the Continent’s privacy standards.
As an added benefit, other countries’ citizens also automatically fall under the protection of arguably the world’s toughest privacy standards, though European rules — particularly for underfunded agencies in developing countries — still must be tweaked to meet local needs.
“What systems we put in place need to be affordable,” said Pansy Tlakula, chairwoman of South Africa’s recently-created privacy authority. “But our message is clear: Prepare yourself to follow the rules.”
Mark Scott is chief technology correspondent at POLITICO.