For the first half of 2018, all eyes were focused eastward on the EU with the start of GDPR enforcement this May. Now, all eyes are shifting westward based on a bold new law passed by California. By January 1, 2020, companies around the world will have to comply with additional regulations related to the processing of personal data of California residents. Pursuant to the California Consumer Privacy Act of 2018, companies must observe restrictions on data monetization business models, accommodate rights to access, deletion, and porting of personal data, update their privacy policies and brace for additional penalties and statutory damages. The California Legislature adopted and the Governor signed the bill on June 28, 2018 after an unusually rushed process in exchange for the proposed initiative measure No. 17-0039 regarding the Consumer Right to Privacy Act of 2018 (the “Initiative”) being withdrawn from the ballot the same day, the deadline for such withdrawals prior to the November 6, 2018 election.
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In the period of just a week, California passed a bold new privacy law — the California Consumer Privacy Act of 2018. This law was hurried through the legislative process to avoid a proposed ballot initiative with the same name. The ballot initiative was the creation of Alastair Mactaggart, a real estate developer who spent millions to bring the initiative to the ballot. Mactaggart indicated that he would withdraw the initiative if the legislature were to pass a similar law, and this is what prompted the rush to pass the new Act, as the deadline to withdraw the initiative was looming.
The text of the California Consumer Privacy Act is here. The law becomes effective on January 1, 2020.
There are others who summarize the law extensively, so I will avoid duplicating those efforts. Instead, I will highlight a few aspects of the law that I find to be notable:
(1) The Act creates greater transparency about the personal information businesses collect, use, and share.
(2) The Act provides consumers with a right to opt out of the sale of personal information to third parties and it attempts to restrict penalizing people who exercise this right. Businesses can’t deny goods or services or charge different prices by discounting those who don’t opt out or provide a “different level or quality of goods or services to the consumer.” However, businesses can do these things if they are “reasonably related to the value provided to the consumer by the consumer’s data.” This is a potentially large exception depending upon how it is interpreted.
(3) The Act allows businesses to “offer financial incentives, including payments to consumers as compensation,” for collecting and selling their personal information. Financial incentive practices cannot be “unjust, unreasonable, coercive, or usurious in nature.” I wonder whether this provision will undercut the restriction on offering different pricing or levels of service in exchange for people allowing for the collection and sale of their information. Through some clever adjustments, businesses that were enticing consumers to allow the collection and sale of their personal data through different prices or discounts can now restructure these into “financial incentives.”
In an unprecedented transition, the FTC just got a full slate of 5 new commissioners, three Republicans and two Democrats:
Joe Simons (Chairman) – R
Noah Phillips – R
Christine Wilson – R
Rohit Chopra – D
Rebecca Slaughter – D
It is difficult to predict how the FTC will approach privacy. The new commissioners will be inheriting some high-profile investigations (Equifax and Facebook), and they will also be inheriting the legacy of the FTC as serving as the leading privacy regulator in the United States. There are some, such as Berin Szóka, who argue that the FTC’s power needs to be reigned in. In contrast, I posit that just the opposite is in order: the FTC must pursue a bold enforcement agenda.
The reason is that we don’t live in an isolated world. The European Union (EU) has seized the scepter of leading regulator of multinational companies. Nearly every chief privacy officer at a large multinational company tells me that their focus is 90% or more on the General Data Protection Regulation (GDPR) — the massive and rigorous privacy regulation in the EU that will start being enforced on May 25 of this year. Effectively, for many companies, the regulators they are paying attention to are across the pond.
The US shouldn’t let itself fade into irrelevance. For years, the FTC has been working to convince the EU that there really is meaningful privacy regulation in the US — and I believe that this effort made a difference. Perhaps it didn’t convince all EU policymakers, but it definitely had an effect on some policymakers. This was how the US was able to establish the Privacy Shield Framework, built in the smoldering ashes of the Safe Harbor Arrangement that the European Court of Justice demolished in one swift stroke.
Evan Seligner, Jules Polonetsky, and Omer Tene have just published a terrific edited volume of essays called The Cambridge Handbook of Consumer Privacy. This is a truly impressive collection of writings by a wide array of authors from academia and practice. There’s a robust diversity of viewpoints on wide-ranging and cutting-edge issues. The book has a hefty price tag, but it is a terrific resource.
I have a blurb on the back of the book. This is what I wrote:
The Cambridge Handbook of Consumer Privacy is a magnificent collection of essays – each one short, engaging, and thought-provoking. The broad range of topics covers the most important and vital issues in consumer privacy, and these essays will be relevant for years to come. The authors are a superb assembly of the leading scholars and practitioners from diverse fields and perspectives. This book is a true feast of ideas.
Below is the table of contents. I found a few of these essays on SSRN, where they are available for free, and I am linking to the ones I found. Continue Reading
The New York Times Magazine has an interesting article entitled What Does Your Credit Card Company Know About You? From the article: