Sam was Alpha Digital’s first employee and now spends his day managing the business. He currently works from our Sydney office for 3 weeks every month and when he’s not at work he’s probably playing or watching basketball. Get in touch if you’re in Sydney!
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On May 25 2018, the new privacy regulations the General Data Protection Regulations (GDPR) will come into force in the European Union. Whilst it’s immediately obvious that this will have a massive impact within the EU, Australian businesses are also being put on high alert.
The GDPR aims to give control of personal data back to the individual (the Data Subject). It does this by enacting strict regulations around the collection, retention, and use of the data on the part of the companies collecting the data, and on the companies processing the data.
But why should Australian businesses care about new privacy regulations in the EU? Well these regulations are very broad in scope, and aim to apply to businesses based not only within the EU, but across the rest of the world too. It does this by referring to businesses that are either established within the EU, or businesses who offer goods and services or monitor the behaviour of people within the EU.
Basically, if you sell goods or services to customers within the EU – the EU wants you to comply. If you don’t, the fines are huge.
This article aims to explain the GDPR as it applies to retailers within Australia, with a slant towards the types of clients we work with. We’ll aim to help you determine if the GDPR applies to you, give a range of examples (or use cases), explain how the GDPR could be enforced against someone in breach, and provide some tips on how to get your business compliant. If you’re more of a visual learner, we’ll have an infographic soon too.
Before we get into it, a note. We are not lawyers. We are a digital marketing agency, enthusiastic about learning and teaching. If you think you may (or may not) be caught by these regulations, speak to a lawyer. This article is merely our opinion based on our readings and is not legal advice.
Article 3 of the GDPR is key to understand, as it largely drives the rest of the regulations (at least as they apply here).
The key elements (bolded for emphasis and defined below) of Article 3(1) are:
The dealing with personal data; by a
Controller or processor; who is
Established in the EU.
Alternately, the key elements (bolded for emphasis and defined below) of Article 3(2) are:
The dealing of personal data; by a
Controller or processor who is
Outside of the EU; where they
Offer goods or services to people in the EU; or they
Monitor behaviour of people in the EU.
In essence, where a company is not established in the EU, Article 3(1) does not apply, and you must look to Article 3(2). If you’re dealing with personal data of people within the EU, and you’re actively selling to and/or monitoring people in the UK, the GDPR may apply to you.
As with anything related to laws, definitions are important. Below are our interpretations of some of the commonly used terms that come up when talking about the GDPR:
Other important elements relate to the language used (no legalese!), the ease of removal of consent (must be as easy as giving consent), and that there is a verifiable record of consent.
Please note that these definitions are a mix of summaries directly from the GDPR itself, and our interpretations of how they would play out in the wild. This is especially true for Establishment and Offering of Goods and Services.
Retailer A is a small business. They’re not targeting the EU, but they get the occasional sale in the EU. They know that’s the case, but they don’t really keep track of their customers in any meaningful way.
Similar to Retailer A, Retailer B sells a small amount of stock into the EU. The difference is that Retailer B is a bit more advanced in their marketing. They collect and store customer information and email subscriptions in a CRM, and they use a 3rd party tool (like Mailchimp) to segment and market towards these segments.
Because they’re collecting and storing personal data for people within the EU, they are likely to be considered a controller under the regulations. They’re also deciding how this information should be dealt with and use a 3rd party tool to process the data.
It’s unclear at this stage exactly how much a business needs to be selling into the EU, but our best guess is that if they are selling goods into the EU and actively marketing to people within the EU (through Retailer B’s email marketing), they are showing a clear intention to sell goods to people within the EU. Because of this, it seems likely they would be caught by 2(a).
In addition, because Retailer B uses a CRM to collect and monitor their customers within the EU, it may be that they are caught regardless by 2(b). In either instance, they will need to ensure that all past and future personal data collected has come with the proper consent.
Since Retailer B is selling goods and services into the EU (and actively marketing to people within the EU through their email marketing), and they are likely considered a controller under the regulations, it seems likely that they are required to comply with the GDPR or risk facing a fine.
Retailer C explicitly outlines on their website that they do not sell goods outside of Australia. However, due to the popularity of their product, they have had people from the EU sign up to email lists through their website. These email addresses are fed into Facebook to create a lookalike audience and are not properly filtered to remove the emails of people within the EU, though they are only geotargeting within Australia.
Retailer C is likely to be a controller under the regulations as they are collecting personal information from people. They are also then passing that data on to Facebook as a processor.
However they are explicitly not selling products into the EU, so 2(a) will not apply. Retailer C may be caught by 2(b) though, as they are monitoring the behaviour of people within the EU. It therefore seems possible that they are required to comply with the GDPR or risk facing a fine. If they do need to comply, they will need to ensure they have complied with consent provisions.
Retailer D used to sell into the EU, however after hearing about the GDPR last year they made the commercial decision to cease trading within the EU.
Due to their previous operations within the EU, Retailer D has collected a large amount of personal data from people within the EU, including email addresses, postal addresses, gender, and purchase history. All of this information has been collected after customers agreed to receive marketing material’ during the purchase process. Clicking on the ‘What do we use your data for?’ link next to the pre-selected check-box took the user to a page with tens of thousands of words of Ts&Cs, written by their lawyer in typical ‘legalese’. Without a JD, it’s difficult to understand exactly what you’re agreeing to.
Despite no longer selling to the EU, Retailer D has decided that they would like to keep their existing customer data as they believe it will be helpful to their future marketing efforts. They don’t intend on marketing directly to these people, selling to them, or selling within the UK.
Under the GDPR, Consent must be a clear and affirmative action (so the pre-checked box may be an issue), plus any Ts&Cs must be easy to understand (which these were not). Retailer D will now need to decide whether the benefit gained by retaining this historical personal information is greater than the cost they will need to incur in order to get the appropriate consent all data subjects within the EU.
Retailer E is a mid-sized retailer based in Australia but selling their goods globally. They’re especially popular in France, where about 20% of all sales originate. Retailer E is fairly savvy and runs email marketing campaigns, programmatic, search, and social media campaigns, and has on-site personalisation based on users past behaviour. This retailer takes privacy seriously and so has ensured they comply to the letter with all Australian privacy legislation.
Retailer E is almost certainly required to comply with the GDPR. They’re actively selling a significant amount of product into the EU, and are monitoring data subjects within the EU. An example like Retailer B is quite clear cut – they should aim to comply with the GDPR in its entirety. Much like Retailer D, there is now the commercial decision to make around whether or not the risk of non-compliance whilst not being based in the EU outweighs the cost of implementing GDPR-compliant systems and processes.
It’s one thing for the EU to implement the GDPR within its jurisdiction, but it’s another entirely to enforce the laws outside of it.
For established businesses within the EU, it’s clear that the EU (or the member states) could enforce the penalties in the case of non-compliance. As mentioned, these penalties are serious – up to 20 million Euro or 4% of global turnover.
What’s less clear is how this will be done for companies based outside of the EU with no physical presence within the jurisdiction. Currently, there does not seem to be an obvious way for the EU to enforce these rules (read: fine) against companies that are not established within the EU. It may be that countries sign treaties with the EU agreeing to enforce the rules, but at the moment nothing of the sort appears to exist in Australia.
So theoretically then, a small business established only in Australia could breach the GDPR, the EU could make an adverse finding against them and fine them, but at the moment there may not be any way for that fine to be enforced (beyond maybe holding shipments at customs within the EU).
Keep in mind, this could all change with the stroke of a pen, and there’s also no precedent here. The only way we’ll know for sure what will happen in a case like this is when we see it actually happen.
It’s also worth noting that it’s very possible (if not likely) that, following the successful roll out of the GDPR, privacy regulations in Australia are strengthened to match. Therefore being proactive and meeting the more laborious GDPR regulations now (or taking steps to work towards meeting them) may be a prudent decision.
A lot is being made of Article 30 in the GDPR, around an exemption for businesses with 250 or fewer staff.
This article would only seem to apply to the records of processing activities or types of processing activities – not the actual activities themselves. Regardless, elements like consent, and all of the individual rights under the GDPR would still seem to apply regardless.
In addition, this exemption only applies in a limited number of circumstances. So limited in fact, that the exemption probably wouldn’t apply to most business, and especially not to most retailers, dealing with customer data.
Okay, so you’ve weighed up the benefits of selling into the EU or monitoring behaviour within the EU against the cost of complying with the GDPR, and you’ve decided to get compliant. If you’re feeling overwhelmed or unsure of exactly what you need to do, you’re not alone. The majority of businesses even within the EU are simply not ready.
The first thing we recommend doing is consulting an expert, or a team of experts. Until then, below are 12 steps from the UK Information Commissioner’s Office (ICO) that businesses should do to prepare from the GDPR.
The intention of the GDPR is to protect individuals and their privacy – an admirable goal. Australian companies who do a significant amount of business within the EU would do well to get their policies and procedures up to scratch, stat (especially where they are also established within the EU). With fines of up to 20m Euro or 4% of global turnover, a serious breach could cause the offending business to topple over.
This does raise the question of whether for a smaller retailer operating within Australia and doing the occasional sale into the EU, total compliance with the GDPR is a reasonable goal. Obviously, if it’s achievable it should be done, and total compliance should be the goal. However with the likely cost of compliance and the massive question marks around enforceability within Australia, these businesses will need to make a commercial decision weighing up the risks and costs associated with total or partial compliance with the new GDPR. We recommend consulting with an expert in the area to determine your path forward.
FREEMAN, Iain; Ilich, Jessica: (2017). “Additional privacy requirements for Australian organisations under EU privacy laws.”. Privacy law bulletin(1449-8227), 14 (8), p. 149.