Data Protection update - July 2018 | Stephenson Harwood

01 August 2018

Welcome to the July 2018 edition of our Data Protection bulletin, our monthly update on key developments in data protection law.

Data protection

Cyber security

ICO enforcement

Data protection

DExEU Committee publishes report on data flows and data protection after Brexit

The House of Commons Select Committee on Exiting the European Union (the "DExEU Committee") issued a report on 3 July 2018 into the impact of Brexit on data protection and data flows. The DExEU Committee regards the ability to retain data movement between the UK and EU as 'mission critical' to the UK's future trading relationship. It recognises that data flows are fundamental to how the UK economy operates, particularly when considering areas where the UK has comparative advantage, such as the service industry.

As a part of General Data Protection Regulation ("GDPR"), counties which are outside of the EU will need to apply and be assessed for an adequacy agreement to allow free flow of data between the EU and the third countries. Some countries, such as Switzerland, Argentina and New Zealand, have already achieved adequacy decisions and others have limited arrangements, such as the US (via the Privacy Shield) and Canada (applying to commercial organisations only). The report suggests that the UK Government should begin the process of securing an adequacy decision from the EU as soon as possible. According to the DExEU Committee, one of the key objectives for the negotiations should be to maintain the current level of data protection and ensure that data can continue to be transferred across borders in the same way as it is now.

However, the DExEU Committee's report highlights that the UK has proposed a bespoke data protection relationship which is above and beyond merely seeking an 'adequacy' assessment. The proposal suggests a role for the UK Information Commissioner on the EU Data Protection Board (the "EDPB") (which replaced the Article 29 Working Party in May 2018) and the UK continuing to be involved in the ‘one-stop-shop’ mechanism.

It is worth noting that an adequacy decision is not the only method the UK could employ to enable data transfers. Standard contractual clauses, binding corporate rules, codes of conduct, and certification schemes are all options but would, as the DExEU Committee identifies, place a "bureaucratic burden on individual businesses" post-Brexit. An adequacy decision would represent the least burdensome solution for the UK and EU's data flows following the UK's departure from the EU.

See here for the full report.

ICO plans to issue Facebook maximum fine under Data Protection Act 1998

The start of the month brought a detailed update into the investigation by the Information Commissioner's Office ("ICO") into the use of data analytics in political campaigns. The focus of the investigation, so far, has been Facebook and Cambridge Analytica. In February, evidence emerged that an app had been used to harvest the data of 50 million Facebook users across the world (see our March bulletin here). In practice this meant that Facebook contravened the law because it failed to safeguard individuals' information and failed to be transparent about how their data was harvested by others. A Notice of Intent has been issued to Facebook before the fine is finalised, however in the ICO's progress report it has indicated its intention to issue the maximum fine for two breaches of the Data Protection Act 1998 (the "DPA 1998").

Under the DPA 1998 the maximum fine is limited to £500,000, which does not represent a large financial threat to an organisation with the revenue of Facebook, although it is likely that Facebook will also be worried about accompanying reputational damage. Since the introduction of the GDPR in May 2018, the ICO has powers to fine up to 20 million euros, or 4% of global turnover, whichever is higher. The maximum fine for Facebook under the new legislation would likely have been closer to £1.4bn.

The ICO has also taken regulatory action against other organisations in relation to this investigation.

See here for more details.

High court judgment explores Article 6 GDPR in relation to disclosure

A High Court judgment on 3 July 2018 gave some regard to the GDPR in relation to carrying out document searches for the Intellectual Property case Glaxo Wellcome UK Ltd (t/a Allen & Hanburys) and others v Sandoz ltd and others. In this case Glaxo sued the German-based companies in the Sandoz group for allegedly passing off their generic inhaler product "AirFluSal Forspiro", launched in 2015, as Glaxo’s (now out-of-patent) "Seretide Accuhaler" inhaler, which has achieved sales of more than £62 billion globally since launch in 1999. The Defendants argued that they could not comply with their duty of disclosure and were prevented from conducting searches for documents on the grounds that the results may contain the personal data of former employees, who had not expressly consented to the search; and accordingly that such a search may breach German domestic data protection legislation (applicable until 25 May 2018), the GDPR and German supplemental national legislation (applicable from 25 May 2018), and the German Telecommunications Act.

The Court, relying heavily on the GDPR, ruled against the Defendants on this point. In his judgment, the judge agreed that provisions of Article 6 GDPR, and similar provisions in domestic German privacy legislation, require a balancing exercise to be carried out between the individual's rights and the organisation's need to conduct new processing in order to defend, establish, or exercise legal claims. However, the judge dismissed the Defendants' argument that this balance fell in favour of the individual's rights, ruling instead that it was within the organisation's legitimate business interest to perform this search in order to defend the claim.

Democracy disrupted?

In its recent report on personal information and political influence, the ICO has issued a series of recommendations to improve the use of personal data for political purposes.

The key recommendation is for the Government to legislate to introduce a statutory Code of Practice under the Data Protection Act 2018 ("DPA 2018") on the use of personal information in political campaigns. Other recommendations include:

a cross-party solution to improve transparency around the use of data;
ensuring the ICO launches a public awareness campaign prior to the next General Election;
requiring political parties to apply due diligence when sourcing their data sets; and
requiring audits to be held after a referendum campaign to ensure data was handled properly.

Of particular concern to the ICO was a significant shortfall in transparency and provision of fair processing information. As a result, the ICO is calling on key players to take an 'ethical pause' to reflect on their responsibilities when using personal data, particularly as new technologies to explore data are developed.

See here for the full report.

ICO receives a record number of breach notifications

In the ICO’s 2017-18 annual report published this month, the ICO has seen an increase of 29% in self-reported data breaches compared with figures from the previous year's annual report. Additionally, due to the new reporting obligation imposed on organisations following the implementation of the GDPR and the DPA 2018 in May this year (noting that under the DPA 1998, breach notifications were recommended but not a statutory requirement), the ICO has seen a significant spike in notifications. In June 2018, the ICO received approximately 1,700 notifications which is a marked increase on previous levels of, on average, 375 notifications per month.

Breach notifications can be reported to the ICO by a telephone line Monday-Friday from 9am-5pm or via a specific form on the ICO’s website. It is important to remember that not all breaches need to be reported to the ICO and the ICO has stated that it does not want organisations to report all minor incidents. A controller must first consider the likelihood and severity of any risk to people’s rights and freedoms following a breach; if it is “likely” that there will be a risk then the controller must notify the ICO; if it is “unlikely”, then breach notification is not required. The ICO has stated that it is aiming to deal with each report on the day it is received or very soon after.

Please see here for the ICO's annual report.

Is the Privacy Shield in danger?

Due to concerns that the US has not yet implemented the EU-US Privacy Shield (the "Privacy Shield") as promised, the European Parliament has passed a non-binding resolution calling for suspension of the Privacy Shield if the US does not comply with its requirements by 1 September 2018.

The Privacy Shield was approved by an adequacy decision of the European Commission in July 2016 as a framework that provides an adequate level of data protection for the transfer of personal data between the EU and the US. The first annual review of the Privacy Shield was completed in October 2017 (see our October bulletin) which found that the Privacy Shield continued to provide an adequate level of protection for personal data transferred between participating companies, but also set out a number of recommendations for improvement.

The European Parliament now considers that the Privacy Shield does not provide an accurate level of data protection for a number of reasons including:

the US has failed to appoint independent supervisory authorities (such as a permanent Ombudsman) to oversee how EU citizens' personal data is handled as required by the GDPR;
the EDPB has raised concerns about the commercial aspects of the Privacy Shield and issues relating to the bulk collection of personal data by US authorities;
the US plans to adopt a new US CLOUD Act which will allow US national security and law enforcement agencies to access personal data across borders (the Privacy Shield's predecessor, the Safe Harbour Framework, was found inadequate in 2015 due to similar concerns); and
there is a lack of sufficient data breach prevention monitoring.

As a result of this resolution (which is not binding and does not yet suspend the Privacy Shield), the Commission will need to consider the European Parliament's position in its second review of the Privacy Shield which is due to take place in October 2018. If the Commission finds that the Privacy Shield does not provide adequate protection of EU citizens' data, it has the power to amend, suspend or cancel it.

Cross-border cooperation and consistency procedures – State of play

An important change brought about by the GDPR is the new way in which supervisory authorities of the Member States must closely cooperate to ensure a consistent application of the GDPR throughout the EU.

The EDPB has published details of discussions held in its second plenary meeting, at which it considered the consistency and the cooperation systems and shared first experiences on the functioning of the ‘one-stop-shop’ mechanism; the performance of the Internal Market Information System ("IMI"); the challenges the various supervisory authorities are facing; and the type of questions received since 25 May 2018. Most supervisory authorities reported a substantial increase in the number of complaints received. Additionally, there are currently around 100 cross-border cases in IMI under investigation.

The IMI is an IT-based information network developed by the European Commission that links up national, regional and local authorities across borders. This online, secure messaging system enables registered users to communicate quickly and easily with their counterparts in other member states. The IMI was developed to enable member states to help each other; promote confidence and trust through increased communication; and increase efficiency and effectiveness in cooperation between member states.

The EDPB clarified the following:

There has been a significant increase in the number of cases in the last month;
The first results of the new procedures to deal with cross-border cases should be expected in the coming months; and
The procedures by which lead supervisory authorities handle complaints takes time; however complainants should be kept informed of the state of play of their case while these procedures are ongoing.

Please see here for further details.

Cyber security

Timehop breach exposes millions of users' personal data

Timehop, a US company which plugs into users' social media accounts to highlight old memories, has identified a data breach affecting almost all of its users. Over 20 million users had their names and emails compromised and a fifth of those also had a phone number taken in the attack. The breach itself was quite low tech in that an employee's credentials were used to log into the Cloud Computing Environment, create a new user account and grant their account admin access. This user then logged in a number of times over subsequent months and accessed a table containing personal data which was not held behind Timehop's firewall.

In responding to the incident, Timehop has informed federal law enforcement as well as company technical advisors. It has also published detailed information about the breach here. It has provided a set of FAQ's and some technical information about the breach, available here. The detail of this response reflects the increased awareness of the public about cyber security.

Polar Flow vulnerability found to expose locations of military personnel

Dutch security experts were able to use publicly available information from the fitness app Polar Flow to establish the location of military bases, the identity of personnel and the home addresses of those military personnel along with all of the information about their workout. A similar vulnerability was found with the fitness app Strava in January 2018.

The vulnerability identified in both apps is that they publish a global heat map which shows the different exercise routes that their users have plotted when using the app. The map can then be searched to reveal the exercise routes within warzones that personnel have been tracking. The Polar app goes a step further, with the "Explore" feature, in that one can search for and find a user's name and profile picture and previous activities. This may indicate where the personnel live (if their routes begin and end generally at the same house) and can be cross-referenced with social media. Despite the fact that there has not yet been an actual data breach, the exposure of such data poses serious risks to the military personnel and as a result Polar Flow has disabled the Explore feature until further notice.

ICO enforcement

IICSA fined £200,000 for revealing identity of possible child abuse victims

The Independent Inquiry into Child Sexual Abuse ("IICSA"), which provides a forum for victims and survivors of child sexual abuse, has been fined £200,000 by the ICO after sending a bulk email in February 2017 to 90 IICSA participants informing them about an upcoming public hearing. The email addresses of the recipients were mistakenly entered in the "to" field rather than the "bcc" field meaning that all email addresses were visible to all other recipients. The ICO held that the IICSA, set up in 2014 to investigate the extent to which institutions failed to protect children from sexual abuse, did not keep confidential and sensitive personal information secure and as such breached the DPA 1998.

Additionally, the IICSA hired an IT company to manage the mailing list, but in doing so also breached their own privacy notice by sharing participants' email addresses with the IT company without their consent.

The case was dealt with under the DPA 1998, and not the DPA 2018, because of the date of the breach.

ICO takes enforcement action against firms for nuisance calls

At the end of June the ICO took enforcement action against two firms for making nuisance calls. Our Vault Limited, in Chorley, was issued with an Enforcement Notice to stop their illegal marketing activity. Horizon Windows Limited was also given an Enforcement Notice to stop the illegal activity. Alongside the notice, Our Vault Limited was fined £70,000 for making over 55,000 unsolicited marketing calls, from January 2016 to January 2017, to people who had registered with the Telephone Preference Service and had not consented to contact by the company.

STS Commercial Limited fined £60,000

STS Commercial Limited, an IT service provider, has been fined £60,000 for allowing its lines to be used to send spam texts promoting pay day loans to more than 270,000 people, without their consent. The texts were sent between November 2016 and January 2017.

The ICO investigation revealed that STS was relying on the consent of a third party but had not carried out sufficient due diligence checks to ensure that the data complied with the Privacy and Electronic Communications Regulations.