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On January 21, 2019, the French Data Protection Authority, the Commission Nationale de L’Informatique et de Libertés (“CNIL”) announced a sanction of 50 million euros against Google.  On May 25 and 28, 2018, the CNIL received complaints from two different associations, asserting that Google did not have a valid legal basis for the processing of personal data of the users of its services, particularly with respect to ad personalization.  The complaints were brought by “None of Your Business”, a nonprofit organization chaired by Max Schrems (yes, that Max Schrems), and “La quadrature du Net”, a French digital rights advocacy group. The decision is significant for at least two reasons: (1) because it reveals CNIL’s analysis in how it was permitted to issue the decision and sanction despite Google’s European headquarters and (2) because it is the first time the CNIL has leveraged its new powers under GPDR to issue a sanction greater than its € 20 million pre-GDPR limits.

Coordination of Enforcement

The GDPR establishes a “one stop shop mechanism”, providing that an organization with a main establishment in the European Union shall have only one interlocutor, the Data Protection Authority (“DPA”) in the country where its main establishment is located, which shall serve as the “lead authority”.  In Google’s case, their European headquarters is in Ireland.  The lead authority must coordinate the cooperation between the other DPAs before taking any decision about cross-border processing carried out by the company. The CNIL cited the definition of “main establishment” in Article 4(16)(a):  “as regards a controller with establishments in more than one Member State, the place of its central administration in the Union, unless the decisions on the purposes and means of the processing of personal data are taken in another establishment of the controller in the Union and the latter establishment has the power to have such decisions implemented, in which case the establishment having taken such decisions is to be considered to be the main establishment …”.  It then discussed several elements of Google’s European headquarters in Ireland,

After lengthy discussion, the CNIL concluded that the restricted training taking place at Google’s European headquarters reveals that it could not be considered as a main establishment within the meaning of Article 4(16) when it is not established that the Ireland headquarters had decision making power as to privacy policies presented to the user during the creation of this account during the configuration of the Android mobile phone.  In the absence of a main establishment, therefore, the CNIL was competent to initiate this procedure and to exercise its powers. The CNIL therefore asserted authority to make decision regarding Google’s processing operations, and implemented the new European framework interested by all European authorities in the EDPB’s guidelines.

CNIL’s restricted committee carried out online inspections in September 2018 to verify the compliance of the processing operations implemented by Google with the French Data Protection Act and the GDPR by analyzing the browsing pattern of a user and the documents he or she can have access to when creating a Google account during the configuration of Android mobile equipment. On the basis of its inspections, the CNIL’s restricted committee observed two types of breaches of the GPDR.

Violation of Transparency and Information.

First, the CNIL noticed that the information provided by Google was not easily accessible for users:

“Essential information, such as the data processing purposes, the data storage periods or the categories of personal data used for the ads personalization, are excessively disseminated across several documents, with buttons and links on which it is required to click to access complementary information. The relevant information is accessible after several steps only, implying sometimes up to 5 or 6 actions. For instance, this is the case when a user wants to have complete information on his or her data collected for the personalization purposes or for the geo-tracking service.”

The restricted committee also observed that some information is not always clear or comprehensive:

“Users are not able to fully understand the extent of the processing operations carried out by Google. But the processing operations are particularly massive and intrusive because of the number of services offered (about twenty), and the amount and the nature of the data processed and combined. The restricted committee observe[d] in particular that the purposes of processing are described in a too generic and vague manner, and so are the categories of data processed for these various purposes. Similarly, the information communicated is not clear enough so that the user can understand that the legal basis of processing operations for the ads personalization is the consent, and not the legitimate interest of the company. Finally, the restricted committee notices that the information about the retention period is not provided for some data.”

Violation of the obligation to have a Legal Basis for ads Personalization Processing.

Although Google stated that it obtained user consent to process data for ads personalization purposes, the committee considered that the consent was not validly obtained for two reasons:

“First, the restricted committee observed that the users’ consent was not sufficiently informed.   The information on processing operations for the ads personalization is diluted in several documents and does not enable the user to be aware of their extent. For example, in the section “Ads Personalization”, it is not possible to be aware of the plurality of services, websites and applications involved in these processing operations (Google search, You tube, Google home, Google maps, Playstore, Google pictures…) and therefore of the amount of data processed and combined.”

Second, the committee observed that consent collected by Google was neither “specific” nor “unambiguous”.  Admittedly, when a user creates an account he or she can modify some account options by clicking on the button <<More options>>, accessible above the button <<Create Account>>.  It is notably possible to configure the display of personalized ads.  However, the use not only has to click on <<More options>> to access the configuration, but the display of ads personalization is pre-checked. However, the GDPR requires that consent is “unambiguous” only with a clear affirmative action from the user (e.g., opting in by ticking a non-pre-ticked box for instance, as opposed to opting out by clearing a pre-ticked box). Finally, before creating an account, the user is asked to tick the boxes << I agree to Google’s Terms of Service>> and “I agree to the processing of my information as described above and further explained in the Privacy Policy” in order to create the account.  In other words, the user gives his or her consent in full for all of the processing operations purposes carried by Google based on this consent (e.g., ads personalization, speech recognition, etc.). However, GDPR requires that consent is “specific” only if it is given distinctly for each purpose.

Sanctions.

As a result of its findings, the committee publicly imposed a financial penalty of 50 million euros against Google, representing the first time that the CNIL applied the new sanction limits provided by the GDPR.  CNIL stated that the amount and publicity of the sanction was “justified by the severity of the infringements observed regarding the essential principles of the GDPR:  transparency, information, and consent.”

Despite the measures implemented by Google (documentation and configuration tools), CNIL stated that the infringements observed “deprive the users of essential guarantees regarding processing operations that can reveal important parts of their private life since they are based on a huge amount of data, a wide variety of services, and almost unlimited possible combinations.”  The committee recalled that the extent of the processing operations in question “imposes to enable the users to control their data and therefore to sufficiently inform them and allow them to validly consent.”  Moreover, the committee, stated, the violations were continuous breaches of the regulation as they are still observed to date; it Is not a one-off, time-limited infringement.  The CNIL also noted the important place the Android operating system has on the French market, with thousands of French citizens creating Google accounts everyday when using their smartphone. Finally, the restricted committee points out that the economic model of the company is partly based on the ads personalization.

Google Response.

In a statement obtained by ABC News, a Google spokesperson said the company is “studying the decision” to determine its next steps:

“People expect high standards of transparency and control from us. We’re deeply committed to meeting those expectations and the consent requirements of the GDPR. We’re studying the decision to determine our next steps.”

To view the CNIL press release, click here.

To view the CNIL decision (in French), click here.

On January 28, 2017, as part of Data Privacy Day, Facebook shared its data privacy principles for the first time. In a blog post drafted by Erin Egan, Facebook’s Chief Privacy Officer, Facebook posted these principles to help users understand how data is used and managed on the site. Among other things, Facebook’s data privacy principles stress user control of privacy, the goal of protecting users’ accounts and implementing security tools (like two-factor authentication), and user ownership of information shared. Facebook also announced the launch of a new education campaign to help users understand how data privacy is handled by the company. As part of this effort, Facebook is preparing to roll out a “Privacy Center” that features important privacy settings in a single place.

This publication comes ahead of the European Union’s (EU) General Data Protection Regulation (GDPR), which will be implemented on May 25, 2018. The GDPR will set stringent data privacy requirements for companies operating in the EU.  In recent years, Facebook has faced scrutiny from EU regulators over its handling of user data. Facebook hopes to embrace a more transparent data privacy approach to meet all GDPR obligations.

To view Facebook’s Privacy Principles, click here.

With the May 25, 2018 deadline quickly approaching, many businesses are scrambling to prepare for compliance with the EU’s General Data Protection Regulation (GDPR), and questions and conversations are heating up.  Still others are still trying to wrap their arms around what GDPR is and what it means for U.S. businesses.  For those of you still trying to wrap your heads around it, below are a few basics to help familiarize yourself with the regulation and its relevance to you.

  1. I’m a U.S. business. Why does GDPR matter to me?

The reach of the GDPR regulation extends not only to European-based businesses, but also to all companies that do business, have customers, or collect data from people in the EU.  If you even have a website that could collect data from someone visiting the site from the EU, your business could be affected. No matter where your business resides, if you intentionally offer goods or services to the European Union, or monitor the behavior of individuals within the EU, the GPDR could be applicable.

  1. What’s the risk?

In addition to the PR or brand risk of being associated with noncompliance, GDPR provides for some pretty significant monetary penalties .  Some violations are subject to fines up to 10 million EUR or up to 2% of global annual turnover, whichever is greater.  For other violations, it is double – up to 20 million euros or 4% of your global annual turnover, whichever is greater.  For large businesses, this could be a substantial amount.

  1. What should I be doing?

First, talk with your general counsel or outside law firm.  They can help you interpret the law, review contractual obligations and assess the company’s overall privacy policies to help guide your compliance strategy going forward.  They can also help create defensible interpretations within certain ambiguous language in the regulation (e.g., what is “personal data” for purposes of the GDPR?).  The Article 29 Working Party, made up of the data protection authorities (DPAs) from all EU member states, has published guidance to clarify certain provisions, which can be helpful during this process.

Second, create a cross-functional team including areas including (but not limited to): communications/PR, IT, customer experience, digital, legal and operations.  This may be fairly similar to any cross-functional teams you may have (and hopefully have) already established to prepare for data breaches.  This team can begin designing and implementing a compliance strategy.  Under certain conditions, your business may need to appoint a Data Protection Officer (DPO) (See Articles 29 and 30).

  1. What are some key points of the GDPR?

GDPR is a data privacy regulation in the EU that is aimed at protecting users’ rights and privacy online.  It requires business to assess what kinds of data they’re collecting and to make that data accessible to users.  The regulation is long and complex with several moving parts, but four key points may be worth noting.

Key Definitions:  You will see several references to controllers, data subjects, personal data, and processing.  This vocabulary may be unfamiliar in relation to U.S. law, but here is how these key terms are defined – as a business subject to GDPR, you may be a “controller” or you may be a “processor”.  The individual is the “data subject”:

  • “Controller” = “the natural or legal person, public authority, agency or other body which, alone or jointly with others, determines the purposes and means of the processing of personal data; where the purposes and means of such processing are determined by Union or Member State law, the controller or the specific criteria for its nomination may be provided for by Union or Member State law.”
  • “Processor” = “means a natural or legal person, public authority, agency or other body which processes personal data on behalf of the controller”
  • “Data subject”= “an identified or identifiable natural person (see definition of “personal data” above).”
  • “Personal data” = “any information relating to an identified or identifiable natural person (‘data subject’); an identifiable natural person is one who can be identified, directly or indirectly, in particular by reference to an identifier such as a name, an identification number, location data, an online identifier or to one or more factors specific to the physical, physiological, genetic, mental, economic, cultural or social identity of that natural person.”
  • “Processing” = “any operation or set of operations which is performed on personal data or on sets of personal data, whether or not by automated means, such as collection, recording, organization, structuring, storage, adaptation or alteration, retrieval, consultation, use, disclosure by transmission, dissemination or otherwise making available, alignment or combination, restriction, erasure or destruction”
  1. Some Key Articles/Provisions:

Article 12.  Transparent information, communication and modalities for the exercise of the rights of the data subject.

This article creates rules around how users give consent to record their data.  The data subject must be provided with accurate information on all relevant issues, such as the kind of data to be collected or process, and for what purposes. For some particularly sensitive data, (e.g., political opinion, religion, biometric data (including photographs), health data, etc.), consent must be “explicit”.   Consent must be “freely given”, meaning that the user has a “genuine” choice and be able to withdraw consent “without detriment”.  The data subject cannot be obliged to consent to data processing that is not necessary to provide the service he or she has requested.

For these reasons, the traditional “notice and consent” may not be sufficient, and actionable forms or buttons may be necessary.  “Silence, pre-ticked boxes or inactivity,” however, is presumed inadequate to confer consent.  Recital 32 of the GDPR notes that an affirmative action signaling consent may include ticking a box on a website, “choosing technical settings for information society services”, or “another statement or conduct” that clearly indicates assent to the processing.  “Silence, pre-ticked boxes, or inactivity” however, is presumed inadequate.  For those reaching European citizens digitally, working with IT or UX experts may prove important to create a seamless, but compliant, experience.

Article 17.  Right to erasure. 

The “right to be forgotten” means that businesses must be able to remove data on a user at their “without undue delay”.  Further, the businesses have an obligation to erase personal data “without undue delay” under certain additional circumstances.

Article 20. Right to data portability.

Users have the right to receive any data that a business may have on them the firm must provide such data in a “structured, commonly used and machine-readable format”.  Further, the data subject has the right to transmit such data to another business without being hindered by the business that provide the data where the processing is either (a) based on certain consents or (b) carried out by automated means.  Where technically feasible, the data subject also has the right to have the personal data transmitted directly from one controller to another.

Article 8. Conditions applicable to child’s consent in relation to information society services.

Article 8 limits the ability of children to consent to data processing without parental authorization.  Previous drafts of the GDPR had set the age of consent at 13 years old, which would have been consistent with the age set by the United States’ Children’s Online Privacy and Protection Act (“COPPA”). A last-minute proposal aimed  to raise the age of consent to 16 years old.  In the final draft, the age of consent is set at 16 unless a member state sets a lower age no below 13 years.  Thus, unless otherwise provided by member state law, controllers must obtain parental consent when processing the personal data of a child under the age of 16. With the difference between the U.S. age of consent under COPPA set at 13 (COPPA) and the European age of consent under the GDPR set at 16 (unless otherwise lowered by a member state), this could present some challenges for U.S. businesses offering international services.

Article 32.  Security of Processing.

Firms must follow security best practices across the board when collecting and protecting data. This may include, but isn’t limited to, specific password policies, information security frameworks (e.g., NIST, ISO, COBIT/ISACA, SSAE, etc.), and data encryption.

  1. What Else Should I Know?

If you believe your business might be affected, you should already be familiarizing yourself with the GDPR regulations and be well into your compliance plan.  The above summary is a sampling of key points and not a comprehensive analysis,, which should be undertaken to better understand your compliance obligations.  You should also be aware of the ePrivacy Regulation which will be following on the heels of the GDPR.

Whereas the GDPR covers the right to protection of personal data, while the ePrivacy Regulation encompasses a person’s right to a private life, including confidentiality.  There is some obvious overlap here, but the ePrivacy Regulation is intended to particularize GDPR for electronic communications — devices, processing techniques, storage, browsers etc.  The laws are intended to be in sync, but the ePrivacy regulations are still up in the air — optimistically forecasted to be finally approved by the end of 2018, although the implementation date remains to be seen.  In sum, GDPR compliance is all you can focus on right now, and hopefully GDPR compliance should position your business well for any additional compliance obligations that could subsequently arise from the finalized ePrivacy Regulation.

Today, on June 1, 2017, China’s new cybersecurity law, entitled the “Network Security Law”, goes into effect.  The law was passed in November 2016.  It now becomes legally mandatory for “network operators” and “providers of network products and services” to: (a) follow certain personal information protection obligations, including notice and consent requirements; (b) for network operators to implement certain cybersecurity practices, such as designating personnel to be responsible for cybersecurity, and adopting contingency plans for cybersecurity incidents; and (c) for providers of networks.

The law focuses on protecting personal information and individual privacy, and standardizes the collection and usage of personal information. Companies will now be required to introduce data protection measures, and sensitive data (e.g., information on Chinese citizens or relating to national security) must be stored on domestic servers.  Users now have the right to ask service providers to delete their information if such information is abused.  In some cases, firms will need to undergo a security review before moving data out of China. One of the challenges is that the government has been unclear on what would be considered “important or sensitive data”, and which products may fall under the “national security” definition.

Penalties vary, but can include (1) a warning, injunction order to correct the violation, confiscation of proceeds and/or a fine (typically ranging up to $1 million Chinese yuan (~$147,000); (2) personal fines for directly responsible persons up to $100,000 Chinese yuan (~$14,700); and (3) under some circumstances, suspensions or shutdowns of offending websites and businesses and revocations of operating permits and business licenses. Such sanctions would take into account the degree of harm and the amount of illegal gains. (Fines could include up to five times the amount of those ill-gotten gains).

While draft implementing regulations and a draft technical guidance document have been circulated by the Cyber Administration (China’s internet regulator) the final versions of these documents are still forthcoming.  These documents are expected to clarify obligations regarding restrictions on cross-border transfers of “personal information” and “important information”, including a notice and consent obligation. They may also include procedures and standards for “security assessments”, which are necessary to continue cross-border transfers of personal information and “important information”.  Under the draft regulation, “network operators” would not be required to comply with the cross-border transfer requirements until December 31, 2018.  It is expected that the final draft will contain a similar grace period.

Although large multinational corporations are typically accustomed to adapting to new laws and regulations in various countries and are already accustomed to tight internet and content controls in China, there remains concern about the potential cost impacts as well as the enforcement risk of the ambiguous language.  It is also unclear on whether the new law may alienate small or medium sized businesses otherwise looking to enter the Chinese market.  While Beijing is touting the law as a welcome milestone in data privacy, companies both large and small are concerned that the law is both vague and exceptionally broad, thus potentially putting companies at undue risk of regulatory enforcement unrelated to cybersecurity.

For an official press release from the state run website, China Daily, on May 31, 2017, click here.

In a recent opinion, the Second Circuit ruled against the United States government and in favor of protecting data stored overseas. In Microsoft v. United States, the Second Circuit held that the Stored Communications Act (SCA) does not authorize courts to issue warrants against internet service providers (ISPs) for the seizure of customer email content stored exclusively on foreign servers. The case began in December 2013 when the government obtained a warrant to gain access to a Microsoft customer’s account on a server in Dublin, Ireland. Microsoft argued that the United States lacked the authority to obtain the data due to its location in an overseas server. The United States countered, arguing that the SCA warrant required Microsoft to turn over the data because, although the data was stored in an overseas server, Microsoft had access to it in the United States. Ultimately, the Second Circuit decided in favor of Microsoft. The Court held that the data was located in Ireland and the SCA was not meant to be applied extraterritorially.

On January 24, 2017, the Second Circuit denied rehearing the case. Although the decision was reached in a tie (4-4 vote), the rehearing request was denied due to a rule requiring a majority vote for granting of petitions. The decision garnered four dissents, with each dissenter essentially arguing that the issue rested on the location of the disclosure of the information, which would take place in the United States, and not the location of the information itself.

Microsoft v. United States raises important data privacy questions that will likely reappear in future cases. Asking courts to apply dated technology statutes and answer the complicated question of where virtual data is physically located leaves no straightforward answer. The United States government might get another shot to revisit this question in the near future, but it will have to be through the Supreme Court.

Abstract geometric technology graphic elements. Template design.Today, the Treasury Department issued a General License authorizing transactions and activities concerning information technology products in the Russian Federation despite recent executive order prohibiting such transactions.

In April 1, 2015, President Obama issued Executive Order 13694 (“Blocking the Property of Certain Persons Engaging in Significant Malicious Cyber-Enabled Activities”). In short summary, this order blocked any property or interests in property that is in the US, ends up in the US, or that come within the possession or control of any US persons, if such persons end up being responsible, complicit or supportive of cyber-enabled activities that (1) have the purpose of causing harm or risk to the critical infrastructure sector and are reasonably likely to result in or material contribute to threats to national security, foreign policy or economic heal or financial stability; or (2) the knowing receipt or use by a commercial entity outside or the United States, for commercial or competitive advantage or private financial gain, of trade secrets misappropriate by cyber-enabled means.

On December 28, 2016, following reports regarding the Russian hacking of Democratic political organizations and operatives, President Obama issued Order 13757 (“Taking Additional Steps to Address the National Emergency With Respect to Significant Malicious Cyber-Enabled Activities”) to amend Order 13694. This amendment included an Annex blocking certain entities and individuals, including the Federal Security Services (a.k.a. Federalnaya Sluzhba Bezopasnosti, or “FSB”),but also authorizing the Secretary of Treasury, in consultation with the Attorney General and the Secretary of State, to determine “that circumstances no longer warrant the blocking of the property and interested in property of a person listed in the Annex to this order, and to take necessary action to give effect to that determinations.” The Russian FSB represents Russia’s domestic security service, and must approve certain encrypted technology imports to Russia per domestic law.

Today, however, the Treasury exercised its right in Section 10 by authorizing American tech companies to seek licenses from Russia’s FSB to export their good to Russia, so long as the products are not used in Crimea and do not violate pre-existing sanctions.  Despite claims that the Trump administration is “easing sanctions against Russia”, White House press secretary Sean Spicer claimed in today’s press conference that the Treasury Department’s actions were not “easing sanctions”, and that it is “a fairly common practice of the Treasury Department, after sanctions are put in place, to go back and to look at whether or not there needs to be specific carve-outs for either industries or products and services that need to be going back and forth.” Other experts agreed that the OFAC’s amendment is likely an intention to clean up unintended consequences of the ban through limited carveouts rather than relaxing sanctions.