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Every generation eventually reaches a point (some might call it “early middle age”) where its formative years become the focus of widespread nostalgia. As indicated by the success of the recent Star Wars sequel and numerous current TV programs set in the 1980s from a sitcom like The Goldbergs, to the Cold War thriller The Americans to the supernatural Stranger Things 2016 may be the year when the 80s finally emerged from the pop culture shadow of the 60s.

Children of the 80s will remember it as a time of high-profile struggles between competing brands and standards. Apple famously launched the Mac vs. PC war in a Super Bowl ad that virtually defined the genre. Likewise, Coke battled Pepsi in the seemingly never-ending cola wars, and VHS ultimately triumphed over Sony’s Betamax in the videocassette wars. In keeping with the current 80s retro-fad, a similar battle appears to be unfolding between competing data privacy standards in the US and Europe. The outcome will impact every American company that deals with EU data.

The United States has traditionally taken a libertarian approach to data privacy: “what is not forbidden is permitted.” Outside sensitive sectors such as health (HIPPA) and finance (GLBA), the United States was historically content to let the market police itself. The European approach, perhaps reflecting the trauma of 20th century totalitarian surveillance, is starkly different. There, data collection is permissible but much more tightly regulated.

Until recently, the United States and the EU reconciled these two divergent philosophies by a bilateral protocol known as Safe Harbor. Safe Harbor seemed to work well until 2015, when the European Court of Justice handed down the Schrems decision, holding that that Safe Harbor did not adequately safeguard personal data and therefore violated the EU’s Data Protection Directive.

Schrems left American and EU negotiators scrambling to develop an alternative framework. The negotiators announced a preliminary agreement on the new framework called “Privacy Shield” in February 2016. After a comment period and some adjustments to accommodate the commenter’s input, the European Commission approved Privacy Shield in July 2016.

Privacy Shield

The broad contours of the Privacy Shield proposal have been known for months. Briefly, the United States proposed a number of steps to address EU concerns including (1) the appointment of a Privacy Ombudsman as a single point of contact for European governments on privacy issues; (2) an official commitment from the U.S. government that EU citizens’ data would not be subject to mass surveillance; (3) that bulk collection of data would be “targeted and focused”; and (4) that private companies operating under Privacy Shield would adhere to data retention requirements that mandate the destruction of data when no longer required for its authorized purpose.

Skeptics argue that Privacy Shield is fundamentally Safe Harbor with a better public relations team. For instance, the Article 29 Working Party the advisory body on EU data privacy complained that the Privacy Shield did not categorically bar massive and indiscriminate data collection. Maximillian Schrems, the plaintiff in the original Schrems decision, is reportedly considering another legal challenge.

Analysis of the Commission’s final decision and adequacy determination does not support this view. The adequacy determination is a formal European Commission determination that the United States ensures an appropriate level of personal data protection via its legal and international commitments. The EU press release accompanying the final adequacy decision notes that the Privacy Shield framework addresses the concerns stated in the Schrems decision and the Commission’s own November 2013 post-Snowden recommendations. The key changes concern those issues stressed by European Data Protection Authorities: bulk collection, an independent ombudsperson, and an explicit data retention principle.

Conceptually, the most critical development may be the expanded role of national Data Protection Authorities in monitoring the implementation of Privacy Shield. This ensures robust monitoring at multiple levels. At the government level, American commitments include:

Taken together, the European Union determined that these measures ensure an adequate level of data protection. It also referred to the passage of the USA Freedom Act (limiting bulk data collection) and Presidential Policy Directive 28 (PPD-28), which imposes restrictions on unfettered collection of personal data.

The EU determination means that, starting August 1, 2016, companies relying on Privacy Shield have been able to self-certify to the Commerce Department. This entails a public commitment to Privacy Shield compliance. The commitment will be enforceable under federal law. Since the FTC has pledged to increase enforcement action, the prudent certifying company will ensure that its privacy practices align with Privacy Shield benchmarks. A summary of the key provisions includes:


The technology sector remains the growth engine of the developed world. In 2013, the information technology and communications sector generated 22 percent of all new jobs in the OECD. One study found that Europe has produced 30 “unicorns”, or technology companies worth over $1 billion in the new millennium; the United States has produced 39. Many, like Spotify or Uber, are familiar names.

Consequently, the only viable option for both sides is mutual accommodation. European and American politicians observe that while data privacy is a thorny issue, a world without Privacy Shield would see massive disruptions and inefficiencies. The contagion would not be limited to transatlantic transactions, but flow over to mainstream Europe itself. Privacy Shield has been crafted to accommodate this economic reality in a sufficiently robust framework to withstand the inevitable legal challenges.

For instance, since Schrems, the European Commission has been under a judicial mandate to consistently monitor data collection practices to determine whether the “adequacy” determination regarding U.S. data protection is still justified. To this end, the Commission made the adequacy determination contingent on periodic reviews by the Commerce Department and European DPAs. It also pledged to follow the reports of the U.S.’s Privacy and Civil Liberties Oversight Board. Though the Commission stresses that a suspension of the adequacy determination is on the table, in practical terms this would be the unthinkable nuclear option.

This brings us back to where we began: the computer, cola and video wars of the 1980s. The cola wars pertained to discrete products. So long as some consumers preferred one brand over the other, both could survive in the marketplace. The other “wars” pertained to standards. In those instances, the resulting network externalities led to last-one-standing outcomes. Betamax went the way of the dodo. As the Buggles famously sang, “Video Killed the Radio Star.” Apple survived barely to fight another day (or decade). The data privacy issue concerns standards: namely, whether the U.S. or EU approach will govern. Since the U.S. approach can accommodate the EU approach, but not vice versa, game theory predicts that the EU approach will eventually prevail.

But the United States is unlikely to acquiesce to arrangements that would constitute a de facto continuous renegotiation of Privacy Shield, particularly if it is the only country singled out for such scrutiny. In addition, American privacy law has evolved considerably in the two decades between Safe Harbor and Privacy Shield. This evolution is almost always in the direction of increased regulation. Even absent a general right to privacy, federal law now protects sensitive health, genetic and financial information. Almost every state has a breach notification statute. Perhaps most importantly, federal and state regulators have become increasingly active and aggressive in cyber-enforcement.

Lord Ellenborough famously wrote: “Can the island of Tobago pass a law to bind the rights of the whole world? Would the world submit to such an assumed jurisdiction?” The EU cannot bind the world and the United States would not submit to such jurisdiction. Privacy Shield is best viewed as a hybrid accommodation: a voluntary framework that reconciles the most fundamental EU concerns with core American beliefs in the efficacy of a free market.

Ultimately, Privacy Shield is, as the EU has noted, an evolving mechanism. This is underlined by the limited shelf life of its current form. The EU General Data Protection Regulation is scheduled to go into effect in 2018. That will require additional attention, and likely additional changes, on the part of most companies. Regardless of what the next months bring, Privacy Shield will not be the last word on the subject of trans-Atlantic data privacy.

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