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Tech companies are ‘scrambling’ after the EU’s top court shot down the EU-US Privacy Shield

More than 5,000 companies rely on the shield. Now they have some work to do.

Tech companies are ‘scrambling’ after the EU’s top court shot down the EU-US Privacy Shield

A complaint filed by Austrian data protection activist Max Schrems led a top EU court to strike down the EU-US Privacy Shield.

Photo: Alex Halada/AFP via Getty Images

Tech companies across the U.S. are scrambling to figure out how they can remain in compliance with international privacy laws after Europe's highest court struck down the EU-US Privacy Shield.

In a win for privacy activists, the Court of Justice of the European Union invalidated the Privacy Shield on Thursday, saying the framework does not adequately protect European users from the U.S. government's far-reaching surveillance laws. The decision will force the 5,384 companies that currently rely on the EU-US Privacy Shield to recalibrate their privacy policies, particularly when it comes to how and why they collect data on EU users.

"Like many businesses, we are carefully considering the findings and implications of the decision of the Court of Justice in relation to the use of Privacy Shield and we look forward to regulatory guidance in this regard," Facebook lawyer Eva Nagle said in a statement.

While Facebook, Google, Amazon and Microsoft all partially rely on the EU-US Privacy Shield to transfer data on EU users, 70% of the companies that have been certified under the framework are small- to medium-size businesses, according to the Computer and Communications Industry Association. And those companies, which have fewer resources and likely don't have established servers in the EU, will likely face the greatest challenges as they seek to comply with the decision, said Omer Tene, a vice president with the International Association of Privacy Professionals.

Tene said the privacy professionals he's speaking to are "scrambling," although the decision was not shocking to those watching the case closely.

Eleven U.S.-based companies reached by Protocol on Thursday said they are reviewing the decision with their legal advisers, poring over complicated and extensive agreements and contracts to ensure their current data transfer agreements are still in compliance with the law. Several said they are waiting on further guidance from European and U.S. regulators and might have to make some changes to how they do business.

"Discord is reviewing the ECJ decision and looks forward to regulatory guidance from the European Commission and the Department of Commerce," said a spokesperson for Discord, a popular chat site with users around the world.

Dave Koslow, the chief operating officer of electronic agreements company DocSend, said "there's some work to do" for the company in the immediate term. "We'll need to review our agreements and make any adjustments necessary to accommodate the change in regulations," Koslow said.

While the court struck down the Privacy Shield, its opinion upheld "standard contractual clauses," shorter-term agreements that allow American companies to handle EU data. The court called on data authorities in Europe to ensure those clauses provide an "adequate level of protection" for EU users, which will likely lead to heightened EU scrutiny of those clauses.

Tech firms including Fitbit, Ancestry.com, Box, cloud software company Domo and Akami Technologies all said they will rely on those agreements in lieu of the EU-US Privacy Shield.

"We rely on multiple legal bases to lawfully transfer personal data around the world," said a Fitbit spokesperson. (EU regulators are currently investigating Fitbit's acquisition by Google.) "These include your consent, the EU-US and Swiss-US Privacy Shield, and EU Commission approved model contractual clauses, which require certain privacy and security protections."

Rafi Azim-Khan, the head of data privacy at Pillsbury, said the "seismic" court case is only the latest reminder for companies that privacy is now a "board-level issue."

Correction: This story was updated at 4:51 p.m. to correct where Dave Koslow works.

People

Expensify CEO David Barrett: ‘Most CEOs are not bad people, they're just cowards’

"Remember that one time when we almost had civil war? What did you do about it?"

Expensify CEO David Barrett has thoughts on what it means for tech CEOs to claim they act apolitically.

Photo: Expensify

The Trump presidency ends tomorrow. It's a political change in which Expensify founder and CEO David Barrett played a brief, but explosive role.

Barrett became famous last fall — or infamous, depending on whom you ask — for sending an email to the fintech startup's clients, urging them to reject Trump and support President-elect Joe Biden.

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Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Signal at (510)731-8429.

People

Amazon’s head of Alexa Trust on how Big Tech should talk about data

Anne Toth, Amazon's director of Alexa Trust, explains what it takes to get people to feel comfortable using your product — and why that is work worth doing.

Anne Toth, Amazon's director of Alexa Trust, has been working on tech privacy for decades.

Photo: Amazon

Anne Toth has had a long career in the tech industry, thinking about privacy and security at companies like Yahoo, Google and Slack, working with the World Economic Forum and advising companies around Silicon Valley.

Last August she took on a new job as the director of Alexa Trust, leading a big team tackling a big question: How do you make people feel good using a product like Alexa, which is designed to be deeply ingrained in their lives? "Alexa in your home is probably the closest sort of consumer experience or manifestation of AI in your life," she said. That comes with data questions, privacy questions, ethical questions and lots more.

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David Pierce

David Pierce ( @pierce) is Protocol's editor at large. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.

Politics

In 2020, COVID-19 derailed the privacy debate

From biometric monitoring to unregulated contact tracing, the crisis opened up new privacy vulnerabilities that regulators did little to address.

Albert Fox Cahn, executive director of the Surveillance Technology Oversight Project, says the COVID-19 pandemic has become a "cash grab" for surveillance tech companies.

Photo: Lianhao Qu/Unsplash

As the coronavirus began its inexorable spread across the United States last spring, Adam Schwartz, senior staff attorney at the Electronic Frontier Foundation, worried the virus would bring with it another scourge: mass surveillance.

"A lot of really bad ideas were being advanced here in the U.S. and a lot of really bad ideas were being actually implemented in foreign countries," Schwartz said.

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Issie Lapowsky
Issie Lapowsky (@issielapowsky) is a senior reporter at Protocol, covering the intersection of technology, politics, and national affairs. Previously, she was a senior writer at Wired, where she covered the 2016 election and the Facebook beat in its aftermath. Prior to that, Issie worked as a staff writer for Inc. magazine, writing about small business and entrepreneurship. She has also worked as an on-air contributor for CBS News and taught a graduate-level course at New York University’s Center for Publishing on how tech giants have affected publishing. Email Issie.

Critics incorrectly claim that Section 230 protects bad online platforms from the enforcement of major crimes.

Photo: Ulrich Perrey/Getty Images

Despite current debate over harmful content online and Section 230 of the Communications Decency Act, the truth is that Section 230 is the law that makes our internet a better place. Section 230 is often blamed for all bad content and illegal activity on the internet, but under the law, any activity that's criminal offline is criminal online. In fact, Section 230 provides no shield to criminals from enforcement of state, local and federal laws, whether they commit their crimes on or off the internet.

Take the horrific example of Backpage.com, an online platform that enabled sex trafficking online. In 2018, the federal government seized control of the website, shut it down and threw its owners in prison. The federal government swooped in and enforced federal criminal law. In fact, Section 230 was irrelevant in this case because the law provides no protection for platforms that contribute to criminal wrongdoing. The law also offers no protection for child exploitation or copyright violations.

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Carl Szabo
Carl Szabo is vice president and general counsel at NetChoice.

"The two proposals serve one purpose: to make sure that we, as users, have access to a wide choice of safe products and services online," said Margrethe Vestager, executive vice president of the European Commission and the EU's digital czar.

Photo: Alexandros Michailidis/Getty Images

The European Union on Tuesday proposed a sweeping set of rules to rein in the power of Big Tech, amounting to the most aggressive legislative effort against the industry to date.

The Digital Services Act will require online intermediaries to act more swiftly against illegal content and provide users with more transparency around takedowns. The Digital Markets Act will restrict large companies, labeled "gatekeepers," from engaging in a set of anticompetitive behaviors, including self-preferencing.

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Emily Birnbaum

Emily Birnbaum ( @birnbaum_e) is a tech policy reporter with Protocol. Her coverage focuses on the U.S. government's attempts to regulate one of the most powerful industries in the world, with a focus on antitrust, privacy and politics. Previously, she worked as a tech policy reporter with The Hill after spending several months as a breaking news reporter. She is a Bethesda, Maryland native and proud Kenyon College alumna.

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