Three developments this week probably make for uncomfortable reading in Palo Alto. First, Belgium’s decision to take Facebook to court over alleged breaches of its and European privacy laws, second Belgian proposals that would enable it’s Privacy Commissioner to raise fines of up to EUR 800 000 for breach of privacy legislation; and third the Council of Ministers decision to revive the neglected but not forgotten EU Data Protection Regulation.
All three developments are a headache for those whose on-line business model is to raise revenue by offering a “free” service in return for the commercialisation of users’ data. Whilst regulators and consumers across the pond appear to have acquiesced to the Palo Alto mode of doing on-line business the same can not be said of European consumers and their governments. From an EU perspective privacy is not, nor never can be, a commodity to be traded on the sly behind computer screens through the use of obscure language, esoteric cookies and unfathomable clauses.
Privacy is a right that can only be accessed by the State and commercial operators in rare and highly prescribed circumstances. Although some member states such as the UK or Ireland may be more amenable to Palo Alto’s business model others most notably France, Spain, Austria and to some extent Germany, are not. Sooner or later the regulatory and legal efforts of privacy campaigners and sympathetic governments is going to bite into Palo Alto’s profits be it in the form of endless on-going and expensive litigation, paying for expensive lobbyists, potential future fines amounting to up to 2% of global profit or in the form of ill-will and on-going bad press. See by way of example France’s privacy watchdog‘s decision requiring Google to extend the right to be forgotten to its global domains or face fines. The issue of privacy is not going away anytime soon in Europe.
Belgium’s decision to take Facebook to court was not based on some whimsy political agenda to dent, however small, California’s tech industries nor was is based on an anti-liberal, protectionist measure to stifle innovation in Europe’s digital market. The decision to litigate was based on the fact that Facebook appears to be in breach of Belgian and European privacy law.
A report commissioned by the Belgian Privacy Commission and prepared by the KU Leuven makes for damning reading and indicates how Facebook has been pretty adept at playing fast and loose with member state and European law over the past couple of years. Thus the report found, inter alia, that FB terms of services potentially:
- breach the EU’s Unfair Terms of Contract Directive in terms of abuse of dominant position, potential abuse of copyright law and unfair terms;
- violate EU legislation on legally valid consent for the sharing of user data under Directive 95/46/EC;
- routinely violate the e-Privacy Directive on tracking users and non-users;
Facebook has a lot to answer for but in many respect Facebook is just the scapegoat for the rest of California’s free on-line business model – Google are up to their ears in the same business practices as indeed are all digital business offering “free” on-line services and content – be it a satellite service provider or big media organisations generating revenue by trading user data through their cookie’s policy.
Adding to Palo Alto’s woes is the problem of ever more on-line users downloading AdBlock software and their attempts to prevent this from happening.
All of which leads one to conclude that Palo Alto has two choices. Either it continues trying to put out fires every time a privacy issue in Europe appears over the horizon, it continues paying a fortune to lobbyists to try and bend Europe’s way of thinking on privacy to the US approach to privacy as well as engaging in a cat and mouse game with software that tries to block ads OR it changes the way it does business.
The former approach is not only costly it could potentially damage Palo Alto’s global reputation. Buying Capitol Hill is one thing. Buying Brussels another ball-game all together as Bill Gates learned to his detriment after fifteen years of trying to fight EU decision-makers, regulators and lawyers and failing. The years Bill spent fighting Brussels were wasted years for Microsoft and a great opportunity for his competitors, Apple, Google and Facebook to sprint to the front.
Alternatively Palo Alto can decide to abandon the free model by ditching “It’s free and it always will be” approach to doing business and return to a more honest contractual business model whereby users are offered a genuine choice. Go free if you’re happy to have all your data shared with third parties or upgrade or pay to have your privacy ring-fenced with guarantees that users’ private life will remain just that – private. As already stated too many in Europe are of the opinion that their privacy is not a commodity. First-rate, excellent services on the other hand are and deserve remuneration.
Further, perhaps most imprtantly, peddling in people’s privacy makes for messy law and messy clauses that will forever be questioned, contested and rejected. Trading in return for a monetary fee under contract law, on the other hand, is a far cleaner, neater and less litigious way of conducting business.
Teen-agers and the very young are likely to throw a hissy-fit at the thought of having to pay for use as indeed are some users who’ve grown used to the assumption that quality on-line services should be given to them for free. Many users may well abandon sites such as Facebook, Instagram and WhatsApp. Some may be happy to opt for the free model in return for sharing their data. A large percentage, however, would be happy to pay a competitive rate in return for having their privacy ring-fenced. Palo Alto is still the global trend-setter in offering users the best quality and ease of use. Palo Alto can also benefit from first mover advantage and will continue to dominate the on-line scene for years to come. It may take years before a real competitor to Facebook emerges. Further, if even 20% of FB’s users decide to abandon the site that still leaves FB with a huge market from which to generate an honest income.
As Facebook’s users – (and non-users seemingly) – continue to sacrifice their privacy in return for enriching Palo Alto it is ironic that Zuckerberg is spending ever more of his personal wealth on ring-fencing and protecting his. Surely the time is now ripe for the geeky nerds of yesteryear to grow-up and enter into a more honest mode of doing business rather than pretending they can remain some kind of legendary figures whom Hollywood lined up to make movies about. Continuing current practice will only lead to long-term headaches and increasing bitterness. Better to grab the bull by the horns now and rethink how to generate an income other than peddling, behind the screens, in users’ very personal lives.