Understanding the Consequences: Penalties for Violating GDPR

Introduction

The General Data Protection Regulation [GDPR] is a comprehensive data protection law that came into effect on Fri, 25-May-2018, in the European Union [EU] & the European Economic Area [EEA]. It sets strict requirements for organisations handling personal data & aims to enhance individual’s rights & control over their data in the digital age. GDPR applies to all organisations, regardless of their location, if they handle the personal data of individuals residing in the EU. Compliance with GDPR is not only a legal obligation but also crucial for maintaining customer trust & protecting individual’s privacy.

Complying with GDPR is of utmost importance for organisations in today’s data-driven world. With the increasing frequency of data breaches & privacy concerns, adhering to the regulations helps organisations establish a strong foundation for data protection & security. Non-compliance can lead to severe financial penalties & reputational damage. By complying with GDPR, organisations demonstrate their commitment to respecting individual’s rights & safeguarding their personal data, thereby fostering trust & credibility with customers & stakeholders.

The consequences of GDPR violations can be severe. In the first year of GDPR implementation, over 89,000 data breaches were reported, resulting in fines totaling fifty six (56) Million Euros. In 2019, the UK’s Information Commissioner’s Office [ICO] fined British Airways 183 Million Euros & Marriott International 110 Million Euros for data breaches that affected millions of customers. These fines were the largest ever imposed under GDPR regulations. 

Organisations that fail to comply with GDPR regulations can face a range of sanctions & penalties for violating GDPR. The most severe penalty is a fine of up to twenty (20) Million Euros or four percent (4%) of the organisation’s global annual revenue (whichever is higher). In addition to fines, organisations can be subject to sanctions such as data processing bans, temporary or permanent bans on data processing activities & orders to delete or rectify data. 

The penalties for violating GDPR can have a significant impact on an organisation’s finances & operations. In addition to financial penalties for violating GDPR, organisations can face legal action from individuals whose data has been mishandled, which can result in costly legal fees & reputational damage.

Understanding GDPR Enforcement & Regulatory Authorities

The enforcement of GDPR is carried out by national Data Protection Authorities [DPAs] in each EU Member State, as well as the European Data Protection Board [EDPB] which provides guidance & ensures consistent application of GDPR across the EU. The GDPR enforcement mechanisms include a range of sanctions & penalties for violating GDPR that can be imposed on organisations that fail to comply with GDPR regulations. The most severe penalty is a fine of up to twenty (20) Million Euros or four percent (4%) of the organisation’s global annual revenue (whichever is higher). 

The GDPR’s consistency mechanism, also known as the “one-stop shop,” requires that the supervisory authority in the member state where a company has declared its main establishment take the lead on all privacy-related matters. This mechanism aims to ensure consistent enforcement of GDPR across the EU & avoid duplication of efforts by multiple DPAs. However, if an organisation’s data processing activities affect individuals in multiple Member States, the lead supervisory authority must cooperate with other concerned DPAs. 

Role of Data Protection Officers:

Data Protection Officers [DPOs] play a crucial role in ensuring GDPR compliance. DPOs are responsible for monitoring an organisation’s data management practices, providing guidance on GDPR compliance & serving as a point of contact for individuals whose data is being processed. The qualifications & responsibilities of DPOs may differ depending on the size & industry of the organisation. For example, small organisations may appoint a part-time DPO, while larger organisations may require a full-time DPO with specialised qualifications.

Cross-border cooperation among DPAs

Cross-border cooperation among DPAs is an essential part of GDPR enforcement. The GDPR requires that DPAs cooperate & exchange information to ensure consistent enforcement of GDPR across the EU. To facilitate cross-border cooperation, the GDPR established several cooperation mechanisms, including the one-stop-shop mechanism, mutual assistance, joint operations & consistency mechanisms. 

The one-stop-shop mechanism requires that the supervisory authority in the member state where a company has declared its main establishment take the lead on all privacy-related matters. This mechanism aims to ensure consistent enforcement of GDPR across the EU & avoid duplication of efforts by multiple DPAs. However, if an organisation’s data processing activities affect individuals in multiple Member States, the lead supervisory authority must cooperate with other concerned DPAs.

The GDPR also allows DPAs to provide mutual assistance to each other, including the exchange of information, joint operations & joint investigation teams. DPAs can also cooperate through the consistency mechanism, which involves the European Data Protection Board [EDPB] providing guidance & ensuring consistent application of GDPR across the EU.

Types of GDPR Violations & Associated Penalties for Violating GDPR

There are several types of GDPR violations that can result in penalties. Some of the most common violations include:

Failure to obtain consent: Under the GDPR, companies must obtain explicit & informed consent from individuals before collecting & processing their personal data. Failure to obtain this consent can result in significant fines.

Data breaches: Companies are required to report data breaches to the relevant authorities within seventy two (72) hours of becoming aware of the breach. Failure to do so can result in fines of up to four percent (4%) of annual global turnover or twenty (20) Million Euros, whichever is greater.

Inadequate data protection policies: Companies must have adequate data protection policies & procedures in place to ensure the security of personal data. Failure to do so can result in fines of up to four percent (4%) of annual global turnover or twenty (20) Million Euros, whichever is greater.

Non-compliance with data subject rights: The GDPR grants individuals a number of rights over their personal data, including the right to access, rectify & erase their data. Companies that fail to comply with these rights can be fined up to four percent (4%) of annual global turnover or twenty (20) Million Euros, whichever is greater. 

Violations related to data transfers outside the EU/EEA: Under the GDPR, personal data can only be transferred outside the EU/EEA if certain conditions are met. These conditions include obtaining explicit consent from the data subject, implementing appropriate safeguards such as binding corporate rules or standard contractual clauses or ensuring that the destination country has been deemed to have an adequate level of data protection by the European Commission. 

Calculation of GDPR Fines

Two-tiered structure for GDPR fines & Maximum fines for different categories of infringements

Under the GDPR, there is a two-tiered structure for fines. The first tier applies to less severe violations & can result in a fine of up to ten (10) Million Euros or two percent (2%) of the company’s worldwide annual revenue from the preceding financial year, whichever amount is higher. The second tier applies to more serious violations & can result in a fine of up to twenty (20) Million Euros or four percent (4%) of the company’s worldwide annual revenue from the preceding financial year, whichever amount is higher. The severity of the violation determines which tier of fines will be applied.

It is important to note that the GDPR allows for fines to be imposed on a case-by-case basis & takes into account various factors such as the nature, gravity & duration of the infringement, the number of data subjects affected & the degree of responsibility of the company. 

Factors considered in determining fine amounts

According to Article 83 of the GDPR, the factors that may be considered when determining the level of a fine include the nature, gravity & duration of the infringement, the number of data subjects affected, the level of cooperation with the supervisory authority & any previous infringements by the controller or processor.

The European Data Protection Board [EDPB] has also provided guidelines on the calculation of administrative fines under the GDPR. According to the guidelines, the amount of the fine should be effective, proportionate & dissuasive in each individual case. The guidelines provide a step-by-step approach to calculating fines, which includes establishing the number of infringements, assessing the starting point sum, considering mitigating & aggravating factors, checking the sum against the legal maximum & analysing the effectiveness, dissuasiveness & proportionality of the fine. 

Notable GDPR Enforcement Cases & Penalties

Since the GDPR came into effect in May 2018, there have been several notable enforcement cases & penalties for violating GDPR imposed on companies that have violated the regulation. Here are some examples:

Google LLC: In January 2019, the French data protection authority CNIL fined Google fifty (50) Million Euros for violations related to transparency, information & consent. The CNIL found that Google had failed to provide users with clear & concise information about the processing of their personal data & had not obtained valid consent for personalised advertising.

British Airways: In July 2019, the UK Information Commissioner’s Office [ICO] announced its intention to fine British Airways 183 Million Euros for a data breach that occurred in 2018. The breach involved the theft of personal data of approximately 500,000 customers, including payment card information.

Marriott International: In July 2019, the ICO also announced its intention to fine Marriott International ninety nine (99) Million Euros for a data breach that had been ongoing since 2014. The breach involved the unauthorised access to the personal data of approximately 339 million guests, including names, addresses, phone numbers & passport numbers.

H&M: In October 2020, the Hamburg data protection authority fined H&M 35.3 Million Euros for unlawfully processing the personal data of its employees. The authority found that H&M had collected extensive personal data on its employees, including information about their private lives & beliefs & had used this data to make employment decisions.

These cases demonstrate that the GDPR is being enforced & that companies can face significant fines for violations. It is important for companies to take data protection seriously & to ensure that they are complying with the regulation.

Mitigating Factors & Remedies

Factors that may reduce GDPR fines:

• The company’s cooperation with the supervisory authority during the investigation. 
• The company’s efforts to mitigate the damage caused by the violation. 
• The company’s history of compliance with data protection regulations. 
• The company’s prompt action to address the violation once it became aware of it. 
• The company’s implementation of appropriate technical & organisational measures to prevent similar violations in the future. 

Factors that may increase GDPR fines:

• The nature, gravity & duration of the violation. 
• The number of data subjects affected by the violation. 
• The extent of the damage caused to data subjects. 
• The intentional or negligent character of the violation. 
• The degree of responsibility of the company, including the role of any senior management involved in the violation. 
• The company’s failure to comply with any orders or requests from the supervisory authority. 

Mitigating actions to demonstrate compliance efforts

To demonstrate compliance efforts with the GDPR, companies can take several mitigating actions, such as:

Conducting a data protection impact assessment [DPIA]: A DPIA is a systematic review of a particular processing activity to assess its impact on data protection & to identify any risks & mitigating measures. Conducting a DPIA can demonstrate that a company has taken a proactive approach to data protection.

Implementing appropriate technical & organisational measures: The GDPR requires companies to implement appropriate technical & organisational measures to ensure the security of personal data. Implementing measures such as access controls, encryption & regular security testing can demonstrate that a company has taken steps to protect personal data.

Appointing a Data Protection Officer [DPO]: Companies that process large amounts of personal data or sensitive data are required to appoint a DPO. Even if not required by law, appointing a DPO can demonstrate a company’s commitment to data protection & can provide expertise & guidance on compliance efforts.

Providing training & awareness-raising: Ensuring that employees are aware of their responsibilities under the GDPR & providing training on data protection can demonstrate a company’s commitment to compliance & can help to prevent accidental violations.

Maintaining documentation: The GDPR requires companies to maintain documentation of their processing activities & compliance efforts. Maintaining accurate & up-to-date documentation can demonstrate that a company is taking data protection seriously & can help to facilitate compliance with the GDPR.

Remedies & corrective measures to avoid future violations

To avoid future violations of the GDPR, companies can take several corrective measures & remedies, such as:

Implementing a data protection compliance program: A data protection compliance program can help companies to identify & address potential violations of the GDPR. The program should include policies & procedures for data protection, training for employees & regular compliance audits.

Conducting regular risk assessments: Regular risk assessments can help companies to identify potential risks to personal data & to implement appropriate measures to mitigate those risks.

Implementing appropriate technical & organisational measures: Companies should implement appropriate technical & organisational measures to ensure the security of personal data, such as access controls, encryption & regular security testing.

Providing training & awareness-raising: Companies should ensure that employees are aware of their responsibilities under the GDPR & provide training on data protection.

Maintaining documentation: Companies should maintain accurate & up-to-date documentation of their processing activities & compliance efforts.

Implementing a breach response plan: Companies should have a plan in place to respond to data breaches, including procedures for notifying data subjects & supervisory authorities.

Conducting regular audits & assessments: Regular audits & assessments can help companies to identify potential violations of the GDPR & to implement appropriate corrective measures.

Reputational Impact & Other Consequences

Reputational damage is one of the most significant consequences of GDPR violations. When a company violates the GDPR & exposes personal data, it can damage the trust & confidence of customers, partners & other stakeholders. The reputational damage can result in lost business, decreased revenue & long-term damage to the company’s brand.

In today’s digital age, data protection is a critical issue & customers are increasingly aware of their rights & expectations for how their personal data is handled. When a company violates the GDPR, it can erode trust & confidence in the company’s ability to protect personal data.

Loss of customer trust & business opportunities is one of the most significant consequences of GDPR violations. When a company violates the GDPR, it can damage the trust & confidence of customers, partners & other stakeholders. Customers may lose confidence in the company’s ability to protect their personal data & as a result, they may take their business elsewhere.

GDPR violations can result in potential legal actions & civil liabilities for companies. The GDPR provides data subjects with the right to seek compensation for any damages suffered as a result of a violation of their rights under the GDPR. This means that individuals whose personal data has been exposed or mishandled can sue the company for damages.

Importance of GDPR Compliance & Best Practices

Benefits of proactive GDPR compliance

Proactive GDPR compliance can provide several benefits for companies, including:

Enhanced reputation: By demonstrating a commitment to data protection & privacy, companies can build trust & confidence with customers, partners & other stakeholders. This can enhance the company’s reputation & lead to increased customer loyalty & retention.

Competitive advantage: In today’s digital age, data protection & privacy are critical issues. By implementing proactive GDPR compliance measures, companies can differentiate themselves from competitors & gain a competitive advantage in the marketplace.

Reduced risk of legal actions & fines: By complying with the GDPR, companies can reduce the risk of legal actions & fines resulting from GDPR violations. This can save the company significant costs & resources that would otherwise be spent on legal fees & fines.

Improved data security: Proactive GDPR compliance measures can improve data security & reduce the risk of data breaches & cyber attacks. This can protect the company’s intellectual property, trade secrets & other sensitive information.

Increased efficiency: GDPR compliance measures can help companies to streamline their data processing activities & improve efficiency. This can save time & resources & improve the company’s overall performance.

Better customer relationships: By protecting personal data & respecting the privacy rights of customers, companies can build stronger relationships with customers. This can lead to increased customer satisfaction, loyalty & advocacy.

Best practices for data protection & privacy

There are several best practices for data protection & privacy that companies should follow to comply with the GDPR & protect personal data. Some of these best practices include:

• Conducting regular data protection impact assessments (DPIAs) to identify & address privacy risks.
• Implementing appropriate technical & organisational measures to ensure the security of personal data, such as encryption, access controls & data minimization.
• Appointing a data protection officer (DPO) to oversee GDPR compliance & act as a point of contact for data subjects & supervisory authorities.
• Ensuring that data processing activities are lawful, fair & transparent & that data subjects are informed about the processing of their personal data.
• Obtaining valid consent from data subjects before processing their personal data & ensuring that the consent is freely given, specific & informed.
• Implementing procedures for responding to data breaches & notifying data subjects & supervisory authorities in a timely manner.
• Conducting regular GDPR compliance audits & reviews to ensure ongoing compliance with the GDPR & other relevant data protection laws.
• Providing training & awareness programs for employees to ensure that they understand their obligations under the GDPR & how to protect personal data.

Building a culture of compliance & ongoing monitoring

Develop a GDPR compliance program: This should include policies & procedures, data mapping exercises & regular risk assessments to ensure that you are meeting GDPR requirements.

Communicate the importance of GDPR compliance: Make sure all employees understand why GDPR compliance is important & how it affects the company & its stakeholders.

Appoint a Data Protection Officer [DPO]: If required by GDPR, appoint a DPO who will be responsible for overseeing GDPR compliance & ensuring that all employees are trained on GDPR requirements.

Lead by example: Senior management should set the tone for GDPR compliance by following policies & procedures & promoting a culture of ethics & integrity.

Encourage reporting: Employees should feel comfortable reporting any GDPR concerns or violations without fear of retaliation.

Monitor GDPR compliance: Regularly review & audit GDPR compliance activities to ensure they are effective & identify any areas for improvement.

Continuously improve: Use feedback from employees & monitoring activities to update & improve the GDPR compliance program over time.

By following these steps, you can help create a culture of GDPR compliance & ongoing monitoring in your organisation.

Conclusion

In conclusion, non-compliance with GDPR guidelines can result in serious financial, legal & reputational risks for organisations. To avoid these risks, organisations should prioritise GDPR compliance by implementing transparent & fair data management practices, appointing a DPO or data protection lead & providing regular employee training on GDPR compliance. By doing so, organisations can maintain a secure & transparent data management system that benefits both individuals & the organisation itself.