Firms Brace for New European Data Privacy Law

Facebook, Apple, Google, Amazon and I.B.M., individually and through industry groups, have all sought to actively participate in a legislative process that could give half a billion consumers the right to withhold basic personal details while using the Web, putting a major crimp in the financial model that makes those business run.

On Monday, their European counterparts showed up in force at a conference in Berlin to discuss the potential law, which is expected to come to a vote sometime next year. Representatives from European Aeronautics Defense & Space, BMW, Daimler and Rovio Entertainment, the creator of mobile apps like Angry Birds, filled a hotel meeting room and tried to figure out how new rules would affect them.

Even nontech companies like UBS, the Swiss bank, were among the 70 attendees at the Pullman Hotel Scheizerhof near the Tiergarten central park, as the new regulations are expected to affect virtually every type of business.

The effort to create strict new online privacy protections in Europe is motivated by a desire to rein in the data use of social media companies like Google and Facebook, said Ian Walden, a professor of information and communications law at the University of London and a speaker at the conference.

“But the problem is this proposal is going to create a whole new layer of regulation for the vast majority of businesses that have nothing to do with social media,” he said. “They are going to see their compliance loads increase greatly with very little benefit.”

The measures would prohibit the use of a range of standard Web tracking and profiling practices that companies use to produce targeted advertising, unless consumers gave their explicit prior consent. The bill would also grant European consumers a fundamental new right: data portability, or the right to easily transfer an individual’s posts, photographs and video from one online service site to another.

The measures, as well as the creation of an E.U.-wide data privacy regulator, were originally proposed last year by Viviane Reding, the European justice commissioner.

They are now contained in a bill sponsored by Jan Philipp Albrecht, a member of the European Parliament from Hanover. But the fate of the bill, meant to revise an 18-year-old statute, remains murky.

The lead parliamentary committee for the bill is struggling to schedule more than 3,000 amendments to the proposal and has already pushed back a vote from the end of this month until June. Negotiators in the upper house of Parliament are at odds over basic concepts, like the requirement for businesses to obtain prior consent before collecting Web data and proposed penalties for violators, which would be set at up to 2 percent of a company’s annual sales.

“I think at this point, there will be a set of new rules, they will be uniform, and they will raise the level of data protection from where it is now,” said Thomas Lehnert, the director of data protection for EADS Deutschland, who participated in the conference.

EADS, which employs eight full-time data protection officers in 17 countries, may have to hire many more such officers in almost all of its jurisdictions, he said. “I think we are talking about a multiple of what we have now,” Mr. Lehnert said.

U.S. interest in the European deliberations remains significant. About a third of the data-protection officials attending the conference were representatives of U.S.-based companies. Exxon Mobil, Aon, Amway and Procter & Gamble were present, as were the global law firms of Hogan Lovells, Taylor Wessing and Latham & Watkins.

Other countries are watching as well. Lawmakers in South Africa are in the final stages of completing a six-year effort to create the country’s first comprehensive data protection laws, which will be tailored to the new E.U. rules, said Robby Coelho, a lawyer at Webber Wentzel, a law firm in Johannesburg.

“South Africa wants to have internationally recognized data protection standards to attract businesses to the country,” Mr. Coelho said.

Likewise in the Middle East, the overseers of international free trade zones in Qatar and Dubai plan to adopt data protection laws that mirror European rules, said Justin Cornish, a lawyer at Latham & Watkins in Dubai, who also attended the Berlin conference.

“There is an expectation that data protection laws around the world are going to become more stringent, and Europe is leading the way,” Mr. Cornish said.

Tech Giants, Learning the Ways of Washington, Brace for More Scrutiny

In 2012, among other victories, the industry staved off calls for federal consumer privacy legislation and successfully pushed for a revamp of an obscure law that had placed strict privacy protections on Americans’ video rental records. It also helped achieve a stalemate on a proposed global effort to let Web users limit behavioral tracking online, using Do Not Track browser settings.

But this year is likely to put that issue in the spotlight again, and bring intense negotiations between industry and consumer rights groups over whether and how to allow consumers to limit tracking.

Congress is likely to revisit online security legislation — meant to safeguard critical infrastructure from attack — that failed last year. And a looming question for Web giants will be who takes the reins of the Federal Trade Commission, the industry’s main regulator, this year. David C. Vladeck, the director of the commission’s Bureau of Consumer Protection, has resigned, and there have been suggestions that the chairman of the commission itself, Jon Leibowitz, will step down.

The agency is investigating Google over possible antitrust violations and will subject Facebook to audits of its privacy policy for the next 20 years. Its next steps could serve as a bellwether of how aggressively the commission will take on Web companies in the second Obama administration.

“Now that the election is over, Silicon Valley companies each are thinking through their strategy for the second Obama administration,” said Peter Swire, a law professor at Ohio State University and a former White House privacy official. “The F.T.C. will have a new Democratic chairman. A priority for tech companies will be to discern the new chair’s own priorities.”

In early 2012, an unusual burst of lobbying by tech companies helped defeat antipiracy bills, which had been backed by the entertainment industry. Silicon Valley giants like Facebook and Google feared that the bills would force them to police the Internet.

At the end of the year, Silicon Valley also got its way when the Obama administration stood up against a proposed global treaty that would have given government authorities greater control over the Web.

The key to the industry’s successes in 2012 was simple: it expanded its footprint in Washington just as Washington began to pay closer attention to how technology companies affect consumers. “Privacy and security became top-tier important policy issues in Washington in 2012,” said David A. Hoffman, director of security policy and global privacy officer at Intel.

“Industry has realized it is important to be engaged,” he continued, “to make sure government stakeholders are fully informed and educated about the role that new technology plays and to make sure any action taken doesn’t unnecessarily burden the innovation economy while still protecting individual trust in new technology.”

At the end of 2012, tech companies were on track to have spent record amounts on lobbying for the year. In the first three quarters, they spent close to $100 million, which meant that they were likely to surpass the $127 million they spent on lobbying in 2011, according to an analysis by the Center for Responsive Politics, a Washington-based nonpartisan group that tracks corporate spending. Even the venture capital firm Andreessen Horowitz hired a lobbyist in Washington: Adrian Fenty, a former mayor of the city.

Technology executives and investors also made generous contributions in the 2012 presidential race, luring both President Obama and Mitt Romney to Northern California for fund-raisers and nudging them to speak out on issues like immigration overhaul and lower tax rates.

In a blog post in November, the center said Silicon Valley’s lobbying expenditures have ballooned in recent years, even as spending by other industries has fallen.

This article has been revised to reflect the following correction:

Correction: January 2, 2013

An earlier version of this article referred imprecisely to the federal agency headed by Jon Leibowitz. He is chairman of the Federal Trade Commission, not of its Bureau of Consumer Protection.