The US-EU Safe Harbor: An Analysis of the Framework's Effectiveness in Protecting Personal Privacy

This morning, the Future of Privacy Forum (FPF) released our report on the effectiveness of the U.S.-EU Safe Harbor program.  Our analysis, which we first announced in August, responds to recent recommendations by the European Commission and suggests a number of areas where the framework can be further strengthened.

An overview of key findings and recommendations found in the report are listed below:

Findings

• Since its inception, the Safe Harbor has seen tremendous growth.  As of November 2013, over 4,000 companies have signed on to the Safe Harbor’s privacy requirements.
• Companies spend considerable time monitoring and modifying their privacy practices to meet the requirements of the Safe Harbor agreement.
• FPF research shows that the Safe Harbor is effectively enforced by the Federal Trade Commission (FTC) and third-party actors.  Despite a lack of complaints from European Data Protection Authorities, the FTC has used its power to investigate and bring actions against companies for misrepresenting their membership in the Safe Harbor, and against companies that have failed to comply with substantive Safe Harbor requirements.  Additionally, third-party dispute resolution providers such as TRUSTe and the Council of Better Business Bureaus handle complaints from EU citizens and are able to resolve many concerns without the need for legal action.
• The consequences of the EU suspending the Safe Harbor would be extremely negative:

1. Suspending the Safe Harbor’s protections would weaken personal privacy protections for EU citizens.  Under the Safe Harbor, the FTC has the capacity to enforce against US companies on behalf of EU citizens, simplifying complex jurisdictional issues.  The Safe Harbor program also results in stronger investigatory and monitoring powers for the FTC.
2. Alternatives to the Safe Harbor program as a mechanism of compliance with the EU Data Directive may not be feasible for all companies.  These alternative mechanisms, including express consent, model contracts, and binding corporate rules, are either too inflexible or too difficult to implement at scale for the wide variety of companies that rely on the Safe Harbor and provide less transparency for regulators about data flows.
3. Eliminating the Safe Harbor will not prevent the NSA from accessing EU citizens’ data.  The global economy, and particularly the transatlantic economy, will continue to rely on international data transfers, and when US-based companies are presented with a valid legal order from the US government for information, companies will be compelled to provide access to that data regardless of their membership in the Safe Harbor.
4. Restricting the ease of data flows between the EU and US could have an extremely harmful effect on the trans-Atlantic economy.

Recommendations

• To encourage Safe Harbor membership, improved online tools should be developed to assist companies – particularly smaller ones – in determining whether they should self-certify to the Safe Harbor.  Additionally, more administrative resources should be allocated to the Department of Commerce for handling outreach and new member inquiries.
• To improve compliance, a “Safe Harbor Master” should be appointed and housed in the Department of Commerce.  The Safe Harbor Master could help companies determine if it makes sense to join the Safe Harbor program given their actual data practices.   Once the company is a member, the Master could continue to monitor the company to make sure they are complying (e.g., reviewing policies to make sure they are accurate), issuing guidance to participants and, in cases of recalcitrance, referring targets to the FTC for enforcement.  The Master also could prepare annual reports for the EU and coordinate efforts between Department of Commerce and the FTC.
• To bolster enforcement efforts, European Data Protection Authorities should do more to educate their citizens about the Safe Harbor program.  The amount and substance of information about the Safe Harbor varies widely among DPA websites.  For instance, in some cases, there is no reasonable way for an average EU citizen to find a basic complaint form.  Also, the Department of Commerce’s Safe Harbor website should be updated to better help individuals understand their rights.

 

With these reforms, as well as continued vigilance by regulators and compliance bodies, the Safe Harbor will become even more effective in safeguarding citizens’ commercial privacy rights.  FPF hopes this report will help advance constructive dialog about the Safe Harbor framework moving forward.

The full report is available to read here.