EU data protection reforms risk strangling innovation - CBI

19 Mar 2012 09:48 AM

Plans to reform data protection laws in Europe will restrict and burden businesses and threaten innovation, the CBI said recently.

Read the full report (pdf)

In its submission to the Ministry of Justice’s Call for Evidence on the European Commission’s data protection proposals, the UK’s leading business group said the proposed regulation will threaten many innovative business models, which rely on data sharing to generate revenue.

Compliance will also place a cost burden on all businesses which may deter investment and be passed on to consumers.

The CBI is calling on the European Commission to revise its proposals, in favour of a proportionate, risk-based approach to the scope of data protection regulation, taking fully into account the benefits versus costs of any changes and their impact on innovative business models.

Matthew Fell, CBI Director for Competitive Markets, said:

“We’re concerned that the EC’s proposed data protection reforms will put European businesses at a competitive disadvantage in a global market, by placing restrictive controls and high cost-burdens on innovation and investment.

“Many novel business models rely on data-sharing to generate revenue and offer a more individually-tailored user experience. Advertising and subscription-based online music-sharing services are a good example, where we’ve recently seen ground-breaking innovation through partnerships with social networking sites.

“Sharing information about music likes and dislikes online, without sharing the actual content, means millions more customers can now enjoy listening to music online legally – a lifeline for the flagging music industry.

“It’s innovative businesses like these, on and offline, which will be threatened by restrictive controls on data-sharing proposed by the EC, while the cost of compliance will burden all industries, deter investment, and ultimately be passed on to consumers.

“Since innovation is a key driver of economic growth, it’s vital that governments here and in Europe support cutting-edge businesses to continue to innovate, before they get left behind by the rest of the world.”

Firms from across the commercial spectrum will be affected by these changes, as better quality data increasingly drives improvements to business operations and services.

To ensure businesses can stay competitive and support growth, the European Commission must balance the data protection rights of individuals with the needs of customers and businesses.

Compliance costs

The CBI believes that the European Commission has over-estimated the financial benefits to businesses of the proposed data protection regulation, and overlooked compliance costs, including:

  • Changing IT systems, re-training staff, and re-issuing customer terms and conditions. Equipping a call centre to handle issues arising from the changes alone could cost around £100,000
  • The requirement to appoint a Data Protection Officer for two years at a cost of between £30,000 and £75,000 per year
  • Expanding the role of the Information Commissioner’s Office in the UK to process additional data protection work could place a further cost-burden on taxpayers

The European Commission risks undermining its aim of delivering cost-savings to businesses, and must focus on how costs can be reduced so they are not passed on to businesses and consumers.

Notes to Editors:

A copy of the CBI’s submission to the Ministry of Justice’s Call for Evidence on the European Commission’s data protection proposals is attached.

Download "CBI response: Data Protection in the EU" (2,333kb)