The European Parliament has shown overwhelming support for a reform in EU data protection laws. Victoria Clarke investigates what the proposed changes mean for B2B brands and marketers
On Tuesday 11 March 2014, an overwhelming majority of members of the European Parliament voted in plenary in favour of a new data protection regulation, which if implemented would signal a significant shift in existing legislation. The current 1995 Data Protection Directive, while being drastically out of date now, allows for variations in the way the law is implemented in different EU countries. If the new regulations are adopted, a single law would be enforced across the whole of the EU. Regardless of whether a directive or regulation is finally passed as law (the results of the aforementioned plenary vote would suggest the latter), the reform aims to restore trust with regards to safeguarding the personal data of citizens. It also aims to allow businesses of all sizes in the EU to innovate and stimulate economic growth. The long-awaited reform is essential in order to ensure data legislation remains relevant in the digital age.
In the business world, news of the planned reform – particularly if a regulation goes ahead – has been met with mixed feelings. While an actual reform won’t come into effect until at least 2016, it has left many marketers forecasting the direct marketing playing field will change significantly. So what exactly does the new draft legislation propose and what might some of the implications be for B2B brands and marketers?
The need for reform
Back in 1995 when the current EU Data Protection Directive came into force, the marketing landscape looked very different to the all-encompassing digital world of 2014. It’s no wonder then that data legislation from nearly 20 years ago is out of touch with the realities and demands of modern life – both from a data subject’s and a business’ perspective. While businesses have access to even more customer intelligence than ever before, individuals are increasingly demanding to know how and where their data is being used. Well-documented data security breaches and scandals have only fuelled the argument that current legislation needs updating.
The introduction of a single EU-wide law – should the change go ahead – would potentially mean greater clarity and accountability with regards to data handling and usage, not just for EU-based organisations, but also non-EU businesses trading in this territory. However, Martin Sloan, associate in the IP, technology and outsourcing group at Brodies LLP, points out one potential pitfall with the ‘one continent, one rule’ approach. He says: “A regulation will avoid local variations in the way in which the law is implemented. This causes concern for those member states, such as the UK, where the current directive has been implemented in a more business-friendly way than in other member states. At the heart of this is a concern the regulation is too prescriptive and inflexible.”
Sloan’s concerns are echoed in a survey conducted by the Direct Marketing Association (DMA) of 150 senior agency, supplier and client-side practitioners. More than nine in 10 (95 per cent) respondents believed the proposed regulation would be weighted unfairly against the interests of businesses.
The challenge for EU policymakers, says Hasan Bakhshi, director of creative economy in policy and research at Nesta, is to avoid discouraging businesses from becoming more data-driven. He adds: “Policymakers should also consider the interdependencies between regulation and innovation in organisations that are driven by data. For example, our research shows those businesses that are more decentralised and empower their employees to act on their data-driven insights see a boost in productivity four times higher than those that don’t. It stands to reason these flatter, more agile businesses might be hampered by additional layers of bureaucracy introduced by the regulation.”
Proposed amendments
On examining some of the proposed changes to current data legislation it’s easy to see why many businesses are concerned about the effect additional red tape could have on their marketing activity and ultimately their bottom line. The data protection reform proposes several significant amendments, some of which are detailed in the table below alongside potential implications.
Challenges for marketers
The DMA is among those that have been quick to highlight the challenges businesses will face if the proposed regulation is implemented. It warns that a third of businesses are failing to prepare for the impact of the data reform. In a recent statement, Chris Combemale, executive director of the DMA, commented: “Brands will soon have to work harder than ever before to communicate one-to-one with [customers] and must offer compelling reasons to become engaged and to share their personal information. Only the companies who get to grips with how the data protection landscape is changing will be successful in the future.”
Todd Ruback, chief privacy officer at Evidon, offers further caution. He comments: “If the proposed changes were to pass, it would have a chilling effect on creativity and innovation in marketing, both of which depend on a frictionless internet.
“Effective targeting will go through a tectonic shift because the proposal will create borders in a borderless internet. I fear the unintended consequence is that European companies will be left behind in their sandbox and the Data Protection Regulation may weaken European businesses.”
Ruback goes on to warn that a company’s risk for non-compliance will skyrocket and force many multinationals to revise their digital marketing strategy.
A focus on honest and open communication by brands is key to not only adhering to the proposed new law and avoiding a hefty fine (potentially up to two per cent of a company’s global annual turnover) but also building trust among customers; a positive outcome that will in turn yield increased sales for businesses.
David Cole, managing director of FastMap, advises: “Instead of phrasing opt-out statements to be as invisible and innocuous as possible while fully complying with the law, marketers will now have to channel all their creative efforts into persuading and motivating prospects and buyers to opt-in. It’s about trust and openness.”
Support for change
Despite a barrage of concerns among business leaders and marketers about how the proposed regulation could hinder rather than help economic growth, all acknowledge that a reform in law is well over due. Notwithstanding shared apprehensions about the proposed changes, particularly that of the issue of opting-in, Nick Banbury, data strategy partner at Tangible is optimistic about the reform.
As well as reiterating Cole’s advice about the need for honesty and transparency with customers, he concludes: “The proposals are actually a good thing (with the caveats that some of them are plain daft). They are going to force brands to become better marketers, and to have to start engaging with customers on their terms. The real winners will be companies who can embrace the individuality of their customers and create truly relevant and attractive relationships with them.”
So don’t be afraid of change, it can result in improved marketing activity that could end up with your customers seeing you in a positive light.
