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March 7, 2023

What Are the Consequences of Non-Compliance with Data Privacy Laws

It seems like a new data privacy law is going into effect every day, so keeping track of the requirements these laws impose on businesses can be daunting. However, the sheer volume of new laws doesn’t excuse companies from complying with all that apply to them. The consequences can be severe when companies are non-compliant with data privacy laws.

What Penalties Can Companies Face for Non-Compliance with Data Privacy Laws?

Non-compliance with data privacy laws can be costly. Let’s look at some of the largest penalties ever levied to understand what companies may face when they fail in their compliance efforts.

The Largest GDPR Fine

On July 22, 2021, the National Commission for Data Protection in Luxembourg announced a €746,000,000 fine against Amazon. After receiving 10,000 complaints about the company’s practices, the Luxembourgian agency launched an investigation that revealed Amazon was using customer data for targeted advertising in ways that weren’t covered by its privacy policy. While Amazon has rightfully pointed out that there hadn’t been a breach of customer data, this fine highlights that laws about data have moved beyond security and into protecting customer privacy. Companies that don’t transition their policies to cover these new requirements have a good chance of ending up like Amazon here, with massive fines despite no external breach.

The CCPA Means Business

Since the CCPA gives companies 30 days to cure their operations after being notified of a violation, fines are less likely to occur. So, when they do happen, it’s a strong sign of serious malfeasance by the company. On August 24, 2022, the Attorney General of California, responsible for enforcing the CCPA, announced that Sephora was being fined $1.2 million after failing to cure its issues during the 30-day window. According to the Attorney General, Sephora allowed third-party vendors to track customer activity on its website and app and failed to disclose that the activity was being tracked, that Sephora was being paid for the tracking, and that Sephora failed to provide an opt-out option, as required by law. This case emphasizes that consent in data processing is more important than ever, and providing legally required notification and opt-out procedures is vital.

Why do Companies Fail in Compliance?

Because the financial penalties can be so severe, companies must understand the common personal-data mistakes that businesses make that can result in regulatory action.. and how to avoid those mistakes.

They Don’t Understand or Keep up With the Laws

Compliance with data laws is like paying your taxes. Just as not understanding the complexities of tax law isn’t an excuse to not pay taxes owed, not having a complete understanding of data privacy laws doesn’t excuse you from its provisions. Unlike tax law, which only has major changes every few years or so, data privacy is a rapidly evolving organism. Every year, more and more data privacy laws are passed. These range from international requirements, like the GDPR in the EU, to national laws, like those in China and Singapore, to state and provincial laws in countries with a federal system.

The scary reality for most companies is that if the information you’re using to manage your data privacy policies is even six months out of date, your company could be at serious risk of regulatory action based on a brand-new law. For companies, it is critical to ensure that the people you have in charge of your data privacy policies are keeping up with the latest developments to ensure your company is always kept safe.

They Don’t Manage Risk Well

The reality is that if you make a minor mistake in handling personal data just once, it’s unlikely that you’ll be caught. Even if you are, regulatory agencies would have to decide if it’s worth their time to bring enforcement action, given that there’s much bigger fish to fry. That doesn’t mean they won’t penalize your company, but the odds are low. Now, take that same minor mistake and scale it up so that instead of just doing it once, you’ve done it on a hundred thousand or a million records. Now, your “little” mistake has grown so much that regulators can’t ignore it.

That’s not to say that small companies can never get in legal trouble for this issue. But what companies sometimes realize is that the risk grows exponentially with size rather than linearly. For one, businesses tend to process exponentially more records as they grow and use them in more ways. But oversight also gets much more difficult. Larger companies have more departments and more teams, which can make oversight far more difficult. Any one of those can create a data processing nightmare, so companies that fail to empower their data privacy policymakers to enforce the rules and audit teams for compliance may take on far more risk than they realize.

They Don’t Understand the Consequences

Some companies would barely notice a fine if caught violating data privacy laws. But there’s more to regulatory action than just the fine that is levied. Reputational damage is real. When your customers or clients hear that you’re mishandling their data, you can suffer real losses. Your brand image, which can take years or even decades of performance to build, can be cut down in a moment. Companies that don’t take this threat seriously can trick themselves into believing they can easily survive any regulatory action over data privacy. Don’t fall into that trap!

How Mage Helps Companies with Data Privacy

From the examples above, it’s clear that companies need a solid plan for keeping up with changing data privacy laws and ensuring that they remain compliant. However, the plan is only half of the equation. Your data privacy teams need the tools to help them execute their vision. That’s where Mage comes in. Mage provides tools to help companies with data privacy and security from the database to the front end. They start working out of the box but can also be highly customized to meet an enterprise’s needs. Schedule a demo with Mage today to learn more.