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In 2016, the European Union passed the General Data Protection Regulation, or GDPR. The EU law regulates how companies handle personal information from Europe. It also grants Europeans new rights to access, delete, and correct their data. The law went into effect on May 25, 2018.
The GDPR was a sea change in privacy law. It became the most burdensome, generally applicable privacy law in the world. A survey by PriceWaterHouseCoopers found that 77% of businesses expected to pay over $1 million to comply with the new EU law.
In July 2018, California passed a similar law called the California Consumer Privacy Act, or CCPA. Like the GDPR, the CCPA regulates how companies handle personal information. The CCPA grants California consumers new rights to access and delete their data while placing restrictions on entities that collect, store, and sell Californians’ personal information.
Many U.S. business anticipate spending amounts similar to what they spent on GDPR compliance to come into CCPA compliance.
The CCPA goes into effect on January 1, 2020, and many U.S. businesses that were not susceptible to the GDPR will have to comply with the CCPA. The International Association of Privacy Professionals (IAPP) estimates that over 500,000 businesses in the United States, including over 100,000 businesses in California alone, will need to comply with the new law.
With the deadline fast approaching, it is important that manufacturers understand what the CCPA requires and how to comply. The following white paper briefly outlines (1) who needs to comply with the CCPA, (2) what the law requires, and (3) what the penalties are for noncompliance. Please keep in mind that the following is not legal advice. It is only legal information. There are specific carve outs in the CCPA that will apply to manufacturers. For specific advice on how to comply with the CCPA, please consult an attorney.
Who Does the CCPA Apply To?
It can be difficult to determine whether the CCPA applies to your business. The law is complex, and there are various factors that determine whether your company must comply. Fortunately, the privacy experts at the law firm Wilson Sonsini Goodrich & Rosati distilled those factors into three easy questions that cover most companies.
First, does your company handle personal information from California residents?
Keep in mind: the definition of personal information is very broad. Personal information includes any data that has to do with a specific person, including names, addresses, height, weight, preferences, etc. (Click here to learn more about personal information.)
If the answer is no, your business likely does not need to comply with the CCPA. The new law only applies to companies that do business in California, or otherwise handle personal information from California residents. If your company sells directly to California consumers or tracks warranties or other information that links the products you manufacture to California consumers, you should answer yes to this question.
If you answered yes, you also need to answer the next question.
Second, do any of the following apply to your company: (1) you make over $25 million in revenue per year, (2) you handle personal data for 50,000 people, devices, or households from California per year, or (3) you make at least half of your revenue from selling the information of California residents?
If none of these three apply, your company likely does not need to comply with the CCPA. Keep in mind that there are a few exceptions, so it’s important to speak with a lawyer to know for certain. If any of those three scenarios do apply, however, then you need to answer the next question.
Third, is your company for-profit?
If the answer is no, then your organization likely does not need to comply with the CCPA. The CCPA only applies to for-profit businesses; there is, however, an important exception if your non-profit handles information on behalf of a for-profit entity. In that scenario, your organization would need to comply with the new law.
If you answered yes to all three questions, then your business likely needs to comply with the CCPA--and you have a lot of work ahead of you. The following section outlines the main obligations under the law.
To see an automated version of these questions that generates results for you, please click here.
What does the CCPA Require?
The requirements under the CCPA can be divided into four main parts: (1) disclosures, (2) consumer requests, (3) opt outs, and (4) training. There are other smaller obligations under the law that apply in specific circumstances, but these four sections cover the majority of the new law.
Not all personal information collected by companies is subject to the CCPA. Personal information collected by medical device, vehicle, and other manufacturers already operating under privacy regulations such as HIPPA or the Driver’s Privacy Protection Act of 1994, is not covered by the CCPA.
Automanufactuers should also take special note of AB 1146, an amendment that passed the California Assembly and is now being considered by the Senate. AB1146 would exempt vehicle information shared between new auto dealers and vehicle manufacturers when it is shared or retained pursuant to (or in anticipation of) a vehicle repair related to warranty work or a vehicle or part recall.
The CCPA requires that a business must disclose the following information to California residents before the company collects their personal information:
• What personal information your company collects;
• Who your company collects the personal information from;
• Why your company collects the personal information;
• Who your company shares the personal information with;
• What categories of personal information your company sells;
• What categories of personal information your company otherwise shares with others;
• What rights consumers have under the CCPA; and
• Who consumers should contact about their rights under the CCPA.
The CCPA requires that companies allow California consumers to request that the businesses (1) grant them access to their personal information, (2) delete their personal information, or (3) provide information about who the companies have shared their personal information with. Companies must provide at least two ways for consumers to make requests: over the phone and via a website. Companies have 45 days to respond to each request under the law. This deadline, however, can be extended up to 90 days in some circumstances. The law requires companies to be able to provide data going back to the prior 12 months.
The request requirement under the CCPA is generally considered the most burdensome part of the law. In addition to the upfront changes to privacy policies, contracts, and other documents, business must create a system through which consumers can ask the businesses to disclose what data they have about a consumer, how it is shared, and how they obtained as well as to delete or cease sharing the personal information upon a consumer’s request. Request management is therefore an ongoing requirements that businesses must meet in a timely fashion. To learn more about what SixFifty has done to help companies manage their consumer requests, click here.
Data mapping is not an explicit requirement of the CCPA. However, in order to create a robust request management system and to ensure that your company is following the other requirements, data mapping is one of the unwritten requirements that the CCPA imposes.
In order to answer consumer access requests about what information your company collects about a consumer and how it uses it, you need to map your data. The CCPA also requires that your contracts with third party service providers include specific elements (you as the manufacturer may actually be the third party in many situations). Companies must know who all of their service providers are in order to implement those new contract terms and to be able to identify which entities are third parties as opposed to service providers under the CCPA (information sharing with third parties as opposed to service providers is treated as the ‘sale’ of information under the CCPA).
In addition to being a necessary step for achieving CCPA compliance, data maps will also enable your company to get a true vision of what data you have and how you are, or are not, using it. Many companies are finding that they have personal information they do not need or use, thus exposing themselves to unnecessary security risks, which are heightened by the fines the CCPA imposes for security breaches.
The CCPA requires that companies have a policy of training anyone in their organization who is involved in (1) compliance with the CCPA, (2) the privacy practices of the company, and (3) handling consumer requests. CCPA training must be updated each year and teach employees how to handle consumers’ personal information according to the requirements of the law, particularly regarding responding to consumer requests under the CCPA. To learn more about what SixFifty has done to help companies train their employees, click here.
What Are the Penalties for Noncompliance
Penalties under the CCPA be divided into two categories: (1) intentional violations of the law and (2) data breaches. Lawsuits for violations of the CCPA can be brought by the Attorney General or consumers in civil actions.
A company can be penalized up to $7,500 for each intentional violation of the CCPA. An intentional violation includes any action that a company knows that it should take under the law, but chooses not to. Some experts have speculated that violations will be determined on a per-consumer and per-day basis. Under this theory, if a business ignores the disclosure requirements under the CCPA, the California Attorney General could impose a $7,500 fine for each consumer that visited the company’s website each day--a potentially staggering amount. The Attorney General is expected to give further clarification on this point.
Under the CCPA, if a company did not employ “reasonable” security measures to protect personal information, a company can be penalized $750 per record lost in a data breach under the CCPA. The company can also be charged with the actual loss experienced by each consumer who had their personal data compromised.The CCPA is a unique law in that it grants citizens this private ‘right of action.’
The California Consumer Privacy Act of 2018 is one of the most important privacy laws in the history of the United States. It will affect more businesses in a more profound way than any proceeding privacy statute. Manufacturers should start preparing early to meet the requirements of the new law.
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DISCLAIMER: This publication has been prepared by SixFifty, LLC to provide information of interest to our readers regarding the California Consumer Privacy Act. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. SixFifty, LLC does not provide legal advice.