The European Union governments and the European Parliament are expected to agree upon a massive new data protection law that would give people more say over how their digital information is collected and used. A major purpose of the new law is to create a new standard of privacy laws across all 28 members of the EU.
Currently, only some polices within the new law are enforced in specific countries, or by court rulings. The increased approach to privacy protection in Europe will have a significant impact on several major companies who rely on collecting data.
Why it matters
Major technology firms including Google (GOOGL), Amazon (AMZN), and Facebook (FB) heavily rely on user's data for a major part of their marketing division. Major tech firms use one's personal data such as common viewing habits and past purchases as a means to advertise specific products or services that the user might be interested in. These new laws will force these companies to clearly inform what information they are collecting, and how it's being used.
Furthermore, users will have the right to have their information deleted . For example, if a user on Amazon wants to delete all information about their latest purchase, then they'll have the right to demand that information deleted. This new consumer right will make it harder for many companies to use consumer information for marketing purposes.
Another major aspect of the law is it'll require parental consent for anyone under 16 to use social media sites such as Facebook, Instagram, and Snapchat. This new regulation could have a major impact on social media since many users in their teens heavily use these websites and apps. It's hard to determine how many parents may not approve their children using social media before they turn 16.
Finally, another major aspect of the new law it will require companies to report to the local authorities and users about a data breach within 72 hours of it occuring. The new law would require the national authorities and users to be alerted of a data breach within 72 hours of when it occurred. The purpose of the new data breach guideline is to increase transparency to users when they may have been a victim of a cyber-crime.
Beyond the increased difficulties of companies utilizing personal data, the new laws will also impose hefty fines if these companies aren't compliant. According to USA Today The European Commission proposed a fine of 2% of the company's global revenues. Meanwhile the European Parliament recommends a fine of 5% of a company's global revenue.
For companies like Facebook and Google whose revenues are in the billions, then each fine would be a huge hit on their business. The purpose of the hefty fines is to force companies to take these new laws seriously.
Will the US follow suit?
It seems certain that the new EU Data Protection Law will be passed and implemented in the foreseeable future. These new laws will likely create headaches for companies conducting business within the EU. That said, many privacy advocates within the U.S. feel like it's time they follow Europe's example.
Many critics consider the current U.S. data and privacy protection laws are out of date, and there needs to be more consumer protection. One thing for certain is the new EU Law will have a major impact on many tech firms, and it could spark a debate about consumer protection within the United States.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.