The Regulatory Race for Data Protection is Just Beginning

Global Developments in Data Privacy

Cyber crime and increasingly imminent cyber threats have left businesses and citizens concerned about digital privacy, and some governments are responding with legislation. A.T. Kearney’s Paul Laudicina discusses the legal protections various countries are enacting and what the future looks like in terms of data protection regulation.

In an era of data breaches, hacks and digital identity theft, everyone is understandably increasingly worried about protecting their digital lives. Governments are starting to respond with new data protection regulations. The European Union’s General Data Protection Regulation (GDPR), which came into effect in May, is the most significant regulatory marker so far. And nearly 70 percent of global executives anticipate other countries will draw inspiration from the GDPR to create their own data privacy regulations, according to A.T. Kearney’s recent Views from the C-Suite survey. Businesses must prepare to adapt.

The effects of GDPR are wide ranging. The law requires user consent in data collection, data privacy protections, data breach notifications and safe handling of cross-border data transfers. This effectively shifts data collection standards from a passive “opt-out” to an active “opt-in” approach for users. Businesses across the world that collect or have EU citizens’ data — regardless of where they are domiciled — have raced to meet GDPR requirements to avoid steep fines.

GDPR is already putting pressure on other countries to change their approach to privacy protection. As the EU continues to expand and diversify its trade ties with other major economies, more countries will be incentivized to harmonize their regulations with key provisions of the GDPR. The Comprehensive Economic and Trade Agreement with Canada (CETA), for example, includes chapters on the protection of personal information and cross-border data flows. And as a complement to the EU-Japan Economic Partnership Agreement, both parties have agreed to recognize each other’s data protection systems. This includes a commitment from Japan to take further steps to protect the personal data of EU citizens.

GDPR-like regulations are moving ahead independently as well. In August, Brazil signed into law the new General Data Privacy Law. This will create a National Data Protection Authority responsible for data protection monitoring, law enforcement and sanctions. It will cover any company that collects and retains data in Brazil. And in Australia, the mandatory data breach notification law came into force in February, with additional laws to protect the digital ecosystem  likely. The EU is even considering further data protection measures to supplement the GDPR, including a new ePrivacy Regulation that addresses electronic communications and the tracking of internet users.

Digital regulations are also expanding in the world’s two largest economies. In the United States, frustrations are mounting with Silicon Valley’s internet giants, whose business models commoditize user data. In June, the state of California signed a major privacy bill into law requiring technology companies to stop collecting and selling consumer personal data on their request. At the national level, the proposed BROWSER act includes similar “opt-in” provisions to the GDPR, requiring a user’s express consent to use their sensitive information. It has lingered in committee since May 2017, but has received bipartisan support and may serve as an early indicator as to where U.S. legislation on data privacy is heading in the new Congress.

China is also working to enact data protection measures. Beijing’s national standard on personal information protection took effect in May. It is in some ways more expansive than the GDPR, covering any information that would “cause harm to persons, property, reputation and mental and physical health if lost or abused.” But unlike the GDPR, the Chinese standard also covers matters related to national security risk.

The spread of new data privacy regulations poses both opportunities and challenges for business. Companies that can position themselves as champions of data protection will not only evade regulatory penalties, but also demonstrate transparency and deepen consumer trust. Yet the costs of data compliance will rise. Data protection regulations may continue to diverge, posing new challenges for international interoperability and cross-border data flows. Until a global standard emerges, companies will have to navigate competing requirements to overcome market barriers. The GDPR is therefore just the beginning of the global regulatory race for data protection.