How GDPR and Other Data Privacy Laws Impact American Businesses

In today’s digital age, data privacy has become a significant focus for governments, businesses, and individuals worldwide. With increased awareness of how personal data is collected, processed, and stored, multiple jurisdictions have introduced laws to protect consumer information. One of the most influential regulations is the General Data Protection Regulation (“GDPR”) of the European Union, which, despite being an EU law, has real implications for American businesses. Additionally, the rise of data privacy laws in the U.S., such as the California Consumer Privacy Act (“CCPA”), marks a shift in the landscape.

The GDPR, implemented in May 2018, is a comprehensive data privacy regulation that applies to any organization processing personal data of individuals within the European Union, regardless of where the company is based. For American businesses, this means that any company offering goods or services to EU residents or monitoring their behavior must comply with GDPR requirements.

Key aspects of GDPR that impact American businesses include:

1. Consent Requirements: Under GDPR, businesses must obtain explicit consent from EU residents before collecting their data. The consent must be informed, freely given, and revocable, which significantly differs from the implicit or opt-out consent practices common in the United States.
2. Data Subject Rights: GDPR grants EU individuals several rights, including the right to access, correct, delete, and restrict the processing of their data. U.S. businesses must have processes in place to handle these requests promptly, or they risk penalties.
3. Data Breach Notifications: GDPR mandates that data breaches affecting personal data be reported to supervisory authorities within 72 hours. U.S. companies must adapt to these tight reporting timelines, which often differ from state-specific breach notification laws.
4. Severe Penalties for Non-Compliance: GDPR has stringent penalties for violations—up to €20 million or 4% of a company’s global annual turnover, whichever is higher. This threat of significant fines has driven American companies to prioritize compliance.

The U.S. has seen a surge in state-level data privacy laws, with California leading the charge. The California Consumer Privacy Act, effective January 1, 2020, is one of the most comprehensive state privacy laws in the United States, granting California residents rights similar to those under GDPR. While not as far-reaching as the GDPR, the CCPA has influenced other states to propose or pass similar legislation.

Key aspects of CCPA affecting American businesses include:

1. Consumer Rights to Access and Delete: Like GDPR, CCPA allows California residents to request access to the data companies hold about them and to have that data deleted.
2. Opt-Out of Data Sale: CCPA provides consumers the right to opt-out of the sale of their personal information, a significant shift from the common United States practice of data monetization.
3. Financial Penalties: Unlike GDPR’s percentage-based fines, CCPA fines are often specific dollar amounts per violation but can still add up to significant figures, encouraging businesses to comply.

American companies face several challenges in light of GDPR and other privacy laws:

1. Global vs. Domestic Compliance: Balancing GDPR requirements for European customers with United States-based privacy laws can be complex. Some companies choose to adopt GDPR-like policies globally to streamline compliance, while others implement region-specific measures.
2. Cost of Compliance: Investing in compliance efforts—hiring privacy officers, upgrading data systems, and conducting audits—can be costly, particularly for small to medium-sized businesses. However, failing to comply can result in significant fines and reputational damage, making these investments necessary.
3. Third-Party Vendors: Many American businesses rely on third-party vendors for data processing, requiring due diligence to ensure that these partners also comply with privacy regulations. Under GDPR, companies are responsible for how their partners handle data, leading to stricter contract terms and more thorough vetting processes.
4. Evolving Privacy Landscape: The data privacy landscape is constantly evolving, with new laws and amendments emerging regularly. American businesses need to stay informed and agile, adapting policies and practices to remain compliant.

If you have any questions about the GDPR and the CCPA and how they might impact your business, please contact McNeelyLaw LLP by calling (317) 825-5110.

This McNeelyLaw LLP publication should not be construed as legal advice or legal opinion of any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.