Facebook Case Spells Trouble for Data Transfers with Europe

By Sam Schechner and Valentina Pop 

U.S. companies face potential disruptions in how they handle European users' information, after an adviser to the European Union's top court argued that privacy regulators should stop data transfers to countries that force companies to break the bloc's privacy laws.

In a nonbinding opinion, Henrik Saugmandsgaard Øe, an advocate general for the EU's Court of Justice, said judges shouldn't strike down EU-approved contractual clauses that companies use to comply with EU privacy laws overseas, offering relief for businesses and trade groups.

But Mr. Saugmandsgaard Øe then said data-protection authorities should be obligated to block data transfers when companies can't comply with those clauses. That could haunt U.S. tech companies because the case stems from concerns over whether their obligations under U.S. surveillance laws violate EU privacy protections.

The main plaintiff in the case, privacy activist Max Schrems, has argued that Facebook Inc. shouldn't be allowed to transfer its users' data to the U.S., because it could be turned over under secret government requests.

The recommendation, if followed by the court in a decision expected next year, could unleash a series of legal challenges for multinational companies with significant operations in the U.S. and Europe -- in particular, tech giants like Facebook, Alphabet Inc.'s Google, Amazon.com Inc. and Apple Inc. In a worst-case scenario, EU data-protection authorities could order those companies to stop sending user data to the U.S., a potentially costly shift.

Facebook said it was grateful for the "opinion on these complex questions" and looks forward to the final decision. The company didn't specifically address the recommendation that data protection regulators block certain transfers.

Amazon declined to comment, while Apple and Google didn't immediately respond to a request for comment.

In a separate case, the Court of Justice decided Thursday that Airbnb Inc. is an information-society service, rather than a traditional real-estate broker. That distinction under EU law could give Airbnb some ammunition in other legal fights it is waging against what it calls disproportionate regulations, including a pending case in Paris.

Write to Sam Schechner at [e-mail] and Valentina Pop at [e-mail]

(END) Dow Jones Newswires

December 19, 2019 07:10 ET (12:10 GMT)

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