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Popular Media Some EU decision-makers have adopted a radical and unreasonable interpretation of EU data protection law that lacks a limiting principle. The ultimate result may be . . .
Some EU decision-makers have adopted a radical and unreasonable interpretation of EU data protection law that lacks a limiting principle. The ultimate result may be that EU customers lose access not only to cloud services offered by U.S. providers but also to almost any software from the United States. One can only hope that the EU Court of Justice rejects this interpretation and adopts the more pragmatic view shared by the European Commission and many EU governments.
Read the full piece here.
TOTM There has been a rapid proliferation of proposals in recent years to closely regulate competition among large digital platforms. The European Union’s Digital Markets Act (DMA, which . . .
There has been a rapid proliferation of proposals in recent years to closely regulate competition among large digital platforms. The European Union’s Digital Markets Act (DMA, which will become effective in 2023) imposes a variety of data-use, interoperability, and non-self-preferencing obligations on digital “gatekeeper” firms. A host of other regulatory schemes are being considered in Australia, France, Germany, and Japan, among other countries (for example, see here). The United Kingdom has established a Digital Markets Unit “to operationalise the future pro-competition regime for digital markets.” Recently introduced U.S. Senate and House Bills—although touted as “antitrust reform” legislation—effectively amount to “regulation in disguise” of disfavored business activities by very large companies, including the major digital platforms (see here and here).
Presentations & Interviews ICLE Director of Innovation Policy Kristian Stout took part in a virtual panel hosted by the Center for Data Innovation about whether the “automated decision . . .
ICLE Director of Innovation Policy Kristian Stout took part in a virtual panel hosted by the Center for Data Innovation about whether the “automated decision opt-out” features of the EU’s General Data Protection Regulation (GDPR) could be improved without harming users. The full clip is embedded below.
ICLE Issue Brief A new issue brief published jointly by ICLE and the Progressive Policy Institute looks at looming threats to transatlantic data flows between the U.S. and EU that power an estimated $333 billion in annual trade of digitally enabled services.
(This issue brief is a joint publication of the International Center for Law & Economics and the Progressive Policy Institute)
Data is, logically enough, one of the pillars supporting the modern digital economy. It is, however, not terribly useful on its own. Only once it has been collected, analyzed, combined, and deployed in novel ways does data obtain its highest utility. This is to say, a large part of the value of data is its ability to flow throughout the global connected economy in real time, permitting individuals and firms to develop novel insights that would not otherwise be possible, and to operate at a higher level of efficiency and safety.
Although the global transmission of data is critical to every industry and scientific endeavor, those data flows increasingly run into barriers of various sorts when they seek to cross national borders. Most typically, these barriers take the form of data-localization requirements.
Data localization is an umbrella term that refers to a variety of requirements that nations set to govern how data is created, stored, and transmitted within their jurisdiction. The aim of data-localization policies is to restrict the flow of data across a nation’s borders, often justified on grounds of protecting national security interests and/or sensitive information about citizens.
Data-localization requirements have in recent years been at the center of a series of legal disputes between the United States and the European Union (EU) that potentially threaten the future of transatlantic data flows. In October 2015, in a decision known as Schrems I, the Court of Justice of the European Union (CJEU) overturned the International Safe Harbor Privacy Principles, which had for the prior 15 years governed customer data transmitted between the United States and the EU. The principles were replaced in February 2016 by a new framework agreement known as the EU–US Privacy Shield, until the CJEU declared that, too, to be invalid in a July 2020 decision known as Schrems II. (Both complaints were brought by Austrian privacy advocate Max Schrems).
The current threatened disruption to transatlantic data flows highlights the size of the problem caused by data-localization policies. According to one estimate, transatlantic trade generates upward of $5.6 trillion in annual commercial sales, of which at least $333 billion is related to digitally enabled services.[3] Some estimates suggest that moderate increases in data-localization requirements would result in a €116 billion reduction in exports from the EU.
One difficulty in precisely quantifying the full impact of strict data-localization practices is that the list of industries engaged in digitally enabled trade extends well beyond those that explicitly trade in data. This is because “it is increasingly difficult to separate services and goods with the rise of the ‘Internet of Things’ and the greater bundling of goods and services. At the same time, goods are being substituted by services … further shifting the regulatory boundaries between what is treated as goods and services.” Thus, there is reason to believe that the true value of digitally enabled trade to the global economy is underestimated.
Moreover, as we discuss infra, there is reason to suspect that data flows and digitally enabled trade have contributed a good deal of unmeasured economic activity that partially offsets the lower-than-expected measured productivity growth seen in the both the European Union and the United States over the last decade and a half. In particular, heavy investment in research and development by firms globally has facilitated substituting the relatively more efficient work of employees at firms for unpaid labor by individuals. And global data flows have facilitated the creation of larger, more efficient worldwide networks that optimize time use by firms and individuals, and the development of resilient networks that can withstand shocks to the system like the COVID-19 pandemic.
In the Schrems II decision, the court found that provisions of U.S. national security law and the surveillance powers it grants to intelligence agencies do not protect the data of EU citizens sufficiently to justify deeming U.S. laws as providing adequate protection (known as an “adequacy” decision). In addition to a national “adequacy” decision, the EU General Data Protection Regulation (GDPR) also permits firms that wish to transfer data to the United States to rely on “standard contractual clauses” (SCC) that guarantee protection of citizen data. However, a prominent view in European policy circles—voiced, for example, by the European Parliament—is that, after Schrems II, no SCC can provide a lawful basis for data transfers to the United States.
Shortly after the Schrems II decision, the Irish Data Protection Commission (IDPC) issued a preliminary draft decision against Facebook that proposed to invalidate the company’s SCCs, largely on the same grounds that the CJEU used when invalidating the Privacy Shield. This matter is still pending, but a decision from the IDPC is expected imminently, with the worst-case result being an order that Facebook suspend all transatlantic data transfers that depend upon SCCs. Narrowly speaking, the IDPC decision only immediately affects Facebook. However, if the draft decision is finalized, the SCCs of every other firm that transfers data across the Atlantic may be subject to invalidation under the same legal reasoning.
Although this increasingly restrictive legal environment for data flows has been building for years, the recent problems are increasingly breaking into public view, as national DPAs grapple with the language of the GDPR and the Schrems decisions. The Hamburg DPA recently issued a public warning that the use of the popular video-conference application Zoom violates GDPR. The Portuguese DPA issued a resolution forbidding its National Institute of Statistics from transferring census data to the U.S.-based Cloudflare, because the SCCs in the contract between the two entities were deemed insufficient in light of Schrems II.
The European Data Protection Supervisor has initiated a program to “monitor compliance of European institutions, bodies, offices and agencies (EUIs) with the ‘Schrems II’ Judgement.” As part of this program, it opened an investigation into Amazon and Microsoft in order to determine if Microsoft’s Office 365 and the cloud-hosting services offered by both Amazon and Microsoft are compatible with GDPR post-Schrems II. Max Schrems, who brought the original complaint against Facebook, has through his privacy-activist group submitted at least 100 complaints as of August 2020 alone, which will undoubtedly result in scores of cases across multiple industries.
The United States and European Union are currently negotiating a replacement for the Privacy Shield agreement that would allow data flows between the two economic regions to continue. But EU representatives have warned that, in order to comply with GDPR, there will likely be nontrivial legislative changes necessary in the United States, particularly in the sensitive area of national-security monitoring. In effect, the European Union and the Unites States are being forced to rethink the boundaries of national law in the context of a digital global economy.
This issue brief first reviews the relevant literature on the importance of digital trade, as well as the difficulties in adequately measuring it. One implication of these measurement difficulties is that the impact of disruptions to data flows and digital trade are likely to be far greater than even the large effects discovered through traditional measurement suggest.
We then discuss the importance of network resilience, and the productivity or quasi-productivity gains that digital networks and data flows provide. After a review of the current policy and legal challenges facing digital trade and data flows, we finally urge the U.S. and EU negotiating parties to consider longer-term trade and policy changes that take seriously the role of data flows in the world economy.
Read the full issue brief here.
TOTM U.S. and European competition laws diverge in numerous ways that have important real-world effects. Understanding these differences is vital, particularly as lawmakers in the United . . .
U.S. and European competition laws diverge in numerous ways that have important real-world effects. Understanding these differences is vital, particularly as lawmakers in the United States, and the rest of the world, consider adopting a more “European” approach to competition.
TOTM The European Commission recently issued a formal Statement of Objections (SO) in which it charges Apple with antitrust breach. In a nutshell, the commission argues that Apple . . .
The European Commission recently issued a formal Statement of Objections (SO) in which it charges Apple with antitrust breach. In a nutshell, the commission argues that Apple prevents app developers—in this case, Spotify—from using alternative in-app purchase systems (IAPs) other than Apple’s own, or steering them towards other, cheaper payment methods on another site. This, the commission says, results in higher prices for consumers in the audio streaming and ebook/audiobook markets.
Popular Media The Digital Markets Act (“DMA”) is a complex piece of regulation. It includes some great ideas (as tackling predatory innovation) while being surprisingly conservative (defined as “?the wish to . . .
The Digital Markets Act (“DMA”) is a complex piece of regulation. It includes some great ideas (as tackling predatory innovation) while being surprisingly conservative (defined as “?the wish to resist great or sudden change” by the Oxford Dictionary).
TL;DR Some U.S. antitrust advocates, including members of Congress, recently have advocated the United States adopt a more European approach to antitrust policy.
Some U.S. antitrust advocates, including members of Congress, recently have advocated the United States adopt a more European approach to antitrust policy. This comes as the European Commission itself is proposing a Digital Markets Act (DMA) that would impose new regulations on Big Tech platforms and ban many forms of conduct outright.
Europe’s economies are less innovative, less dynamic, and ultimately, significantly poorer than the United States. Europe’s technology markets, in particular, are relatively stagnant. Regulating them directly is likely to make Europe’s problems with innovation worse, and would serve as a poor model for the United States to follow.
Read the full explainer here.
TOTM We can expect a decision very soon from the High Court of Ireland on last summer’s Irish Data Protection Commission (“IDPC”) decision that placed serious . . .
We can expect a decision very soon from the High Court of Ireland on last summer’s Irish Data Protection Commission (“IDPC”) decision that placed serious impediments in the way of using “standard contractual clauses” (SCC) to transfer data across the Atlantic. That decision, coupled with the July 2020 Court of Justice of the European Union (CJEU) decision to invalidate the Privacy Shield agreement between the European Union and the United States, has placed the future of transatlantic trade in jeopardy.
