It’s no secret that many of us take for granted that our personal data is or should be treated with confidentiality and respect. However, the truth is that not until the mid-2010s did we entrust our personal, confidential data to internet companies with minimal legal protection.
To address this issue, the EU introduced the General Data Protection Regulation (GDPR) in May 2018. This regulation marked a significant shift for all online businesses, requiring them to take responsibility for safeguarding their customers’ information.
In December 2020, Twitter was fined €450,000 ($546,000) for failing to document and notify GDPR regulators within 72 hours of a data breach that exposed some users’ private tweets. This was the first cross-border GDPR penalty imposed on a US-based business.
Does this mean all US companies can face penalties under GDPR? Let’s explore the impact of GDPR on US businesses.
The Impact of GDPR on E-commerce
The landscape of e-commerce has undergone a significant shift with the introduction of the General Data Protection Regulation (GDPR) in the European Union.
For businesses that collect vast amounts of customer information, understanding and complying with GDPR is no longer optional – it’s essential for maintaining a healthy online presence within the EU. The best way to ensure GDPR is by contacting a business attorney near you. Their expertise can help you navigate the complexities much more effectively and conveniently.
Consent and Transparency
A core requirement of GDPR is obtaining explicit and freely given consent from individuals before collecting and processing their personal data. E-commerce businesses must be transparent about how customer data will be used and provide clear, concise consent forms and privacy policies. Customers should have the option to opt in or opt out of data collection, ensuring they are fully informed and in control of their personal information.
Data Minimization and Purpose Limitation
GDPR emphasizes the principle of data minimization, which requires businesses to collect only the minimum amount of personal data necessary for their intended purpose. E-commerce organizations must clearly define the purpose of data collection and ensure it is not used for any other purposes without obtaining additional consent.
Data Security and Breach Notification
Data security is paramount in e-commerce, and GDPR mandates the implementation of appropriate technical and organizational measures to protect personal data from unauthorized access, loss, or disclosure. E-commerce businesses must invest in robust security systems and practices to safeguard customer data. In the event of a data breach, organizations are required to notify the relevant supervisory authorities and affected individuals within 72 hours of becoming aware of the breach.
Individual Rights
GDPR grants individuals several rights concerning their personal data, and e-commerce businesses must be prepared to address these rights. Customers have the right to access, rectify, and erase their personal data, as well as the right to data portability.
What U.S. Businesses Need to Know About GDPR
If a U.S. corporation is subject to GDPR, it must comply with the same standards as its EU counterparts. Whether you are an established business or have recently created an LLC or similar business structure, it is important to consider beforehand, the steps that firms in the United States can take to adequately prepare for GDPR.
- Data Audit and Inventory
- Identify all personal data you collect, store, and process. This includes names, emails, phone numbers, addresses, IP addresses, device IDs, payment details, and geolocation data.
- Determine if you collect “sensitive” personal data like race, ethnicity, political opinions, religious beliefs, or trade union memberships. For such data, additional measures like Data Protection Impact Assessments (DPIAs) or appointing a Data Protection Officer (DPO) may be required.
- Legal Basis for Processing
- Establish a legal justification for processing each data point you collect. GDPR allows six legal bases: consent, contract performance, legitimate interest, vital interest, legal obligation, and public interest.
- Only one legal basis applies at a time and should be established before data processing begins. You must be able to demonstrate this legal basis to internal teams, data subjects, and regulatory authorities.
- Data Transfer from EU to Non-EU Countries
- GDPR imposes restrictions on transferring personal data outside the EU. This includes storage, processing, and access by entities outside the European Economic Area (EEA).
- Any organization receiving EU data (including US parent companies) must be legally bound to follow GDPR requirements. Standard Contractual Clauses (SCCs) remain a valid data transfer mechanism, but businesses should audit their use to ensure adequate data protection. Assess the US company’s ability to comply with SCCs and provide sufficient privacy safeguards.
- Data Storage Practices
- With the Privacy Shield invalidated, storing EU data in the US requires extra caution. Consider EU-based or GDPR-compliant cloud service providers.
- Implement robust technical and organizational security measures to prevent data loss, misuse, unauthorized access, disclosure, or alteration.
- Adhere to the principle of storage limitation – store data only for as long as necessary. Delete or anonymize it once the purpose is fulfilled. Remember, users have the right to access, edit, and erase their data upon request.
- User Consent and Transparency
- Obtain informed consent before processing personal data. Consent under GDPR must be freely given, specific, and unambiguous.
- Use clear, jargon-free language in consent forms and website cookie banners. Avoid pre-ticked boxes, default settings, or blanket acceptance as consent. Allow users to easily opt-out or withdraw consent at any time.
- Cookie Consent and Management
- Since cookies can be considered personal data, obtain user consent before placing them on their browsers. Exceptions exist for cookies that are strictly necessary and essential for website functionality.
- Cookie consent should be specific and granular, allowing users to choose which cookies they accept. Don’t block website access or use cookie walls to force acceptance.
- Data Processing Agreements with Third Parties
- Formalize data processing activities with third parties through written agreements.
- Identify and list data processors you work with, and ensure they have Data Protection Agreements (DPAs) in place to meet GDPR requirements. Verify that these third parties have adequate technical and organizational safeguards in place. Include data breach notification terms and provisions for Data Protection Impact Assessments in your agreements.
Final Verdict
The EU’s GDPR mandates strong data privacy protections. While not all US businesses are subject to GDPR, those targeting EU customers or handling their data must comply. This guide outlines key steps for US e-commerce companies to navigate GDPR, including data audits, the legal basis for processing, secure data storage, and transparent user consent practices. Consulting a small business attorney can further ensure GDPR compliance and protect your online presence in the EU.
