On May 25th, 2018, the European Union General Data Protection Regulation (GDPR) and the amendment to the Austrian Data Protection Act will enter into force. The provisions contained therein set out new requirements for the processing of personal data in Austria. Many businesses are uncertain whether and to which extent they will be able to use personal data for marketing purposes in the future. What will remain possible and what should businesses try to avoid in view of the high penalties that can be imposed for infringements against the GDPR?
"Will we be still be allowed to send out our newsletter?" This is one of the questions legal advisers in the field of data protection are being asked most frequently these days. It reflects the uncertainty of many businesses as to how the new data protection rules will affect their advertising activities, in particular with regard to direct marketing.
In less than 4 months the new laws will enter into force. The good news is that direct marketing and other forms of advertising will continue to be possible. However, to avoid severe penalties, businesses should make sure they "play by the data protection rules".
Marketing activities are subject to both the general provisions of the GDPR as well as to national legislation. As a consequence, data processing can only be carried out if it is "lawful". Data processing is considered to be lawful, for instance, if the data subject (i.e. the person whose data is being processed) has expressly consented to the processing of their data for a specific purpose, or if processing is necessary for the performance of a contract to which the data subject is a party. For example, a party to a sales contract may, to the extent necessary, process the data of their contractual partner without having to obtain that partner's express consent.
Furthermore, businesses must proactively comply with their extensive information duties at the time of data collection. This means that they must inform the data subjects about the purpose and the legal basis of the processing.
2. When is Direct Marketing Permitted?
"Direct marketing" is any form of advertising that involves addressing a potential customer directly. A company that sends newsletters by post or e-mail to a personal (e-mail) address of certain (groups of) persons with the intention of eliciting an individual, measurable reaction, is doing direct marketing.
Under the GDPR, direct marketing is permitted either on an "opt-in" or an "opt-out" basis. Under the "opt-in" procedure, recipients must have explicitly given their prior consent, meaning they have to have agreed to receive advertising material, in order for the advertising to be permissible. Under the "opt-out" procedure, direct marketing is generally permissible without the need for the recipient to have given their consent, but recipients must have the right to object to being contacted. As long as they do not object, the direct marketing measures remain permissible.
2.2. When is the Data Subject's Consent Necessary?
So when is the data subject's consent necessary and when is it not? Broadly speaking, the answer is that under data protection law, the data subject's consent is not required if the "legitimate interests" of the business doing direct marketing are considered to be greater than the interests of the recipient not to have their personal data processed. The GDPR expressly stipulates in Recital 47 that direct marketing can be seen as a "legitimate interest" to process data, thereby acknowledging that businesses have a legitimate interest in contacting customers and potential customers, which may override the interests of the recipient.
This means that under the GDPR, direct marketing will generally be permissible in many cases. However, each recipient will have the right to opt out. The right to opt out must be free of charge and must be possible electronically. Businesses will be under a duty to comply immediately, but at the latest within a month's time, if a recipient objects to their data being processed.
Direct marketing will not be permissible without the consent of the recipient in cases where either the data processing involves high intensity intervention (e.g. in certain cases of profiling – see below) or where sensitive data is concerned. Sensitive data includes all health data, biometric data, data concerning sexual orientation, political or religious beliefs, etc. (Art. 9 GDPR).
2.3. Particular Features of Electronic Direct Marketing (E-mails, Text Messages, Social Media, etc.)
Processing data in Austria is not only subject to data protection law, but also to Art. 107 Telecommunications Act. This provision further restricts electronic direct marketing without the recipient's prior consent.
As a result, the recipient's consent is always required in the following cases:
- advertising directed towards potential customers,
- advertising directed towards existing customers concerning the goods/services of a third party, or advertising directed towards existing customers concerning the business' own goods/services, but regarding other goods/services than those in relation to which the business has obtained the data subject's data, and
- telephone marketing.
This means that a business that wants to send e-mail advertisements to a potential customer will always need the recipient's consent. Consent will also be required from existing customers, if, for example, the business has obtained the particular customer's data in the course of the purchase of, e.g., food products, but then wants to advertise sports goods by way of direct marketing.
Therefore, the following do not require the recipient's consent:
- advertising by post,
- advertisements sent to existing customers of the business for its own same or similar goods/services in relation to which the business has obtained the customer's data, and
- pseudonymous personal online advertising, where the identity of the recipient is difficult to determine, e.g. because there is only an IP address.
However, electronic advertising always has to include an "opt-out" option, e.g. the possibility to unsubscribe from a newsletter. In Austria, there is a so-called "Robinson List", which is a list individuals can register with and declare that they do not want to receive any personally addressed advertising material. Address databases wishing to send advertisements must observe entries made in this list (Art. 151 para. 9 Commercial Code).
3. Requirements for Legal Consent
What exactly is the meaning of the term "consent"?
Where data protection laws require a person's "consent", certain conditions must be met. In particular, consent must be given voluntarily and made on an informed basis. This means that a business must inform the individual giving their consent exactly of the purpose of their consent. In addition, consent cannot be coupled with concluding a contract unless this is absolutely necessary to be able to fulfil the contract. This means that consent given within general terms and conditions will often be considered invalid.
In many cases, consent might not be necessary in order to be able to fulfil a contract, but might be useful from an economic point of view. This could be the case, for example, where offers for "free products" on the internet are made that are based on the fact that goods are provided for free, but in return users give their consent to their data being processed.
In order to avoid ending up with invalid contracts due to offers being coupled, it may be advisable to offer two different transaction possibilities: one offer with consent to process data and one without. The latter would then involve costs and be more expensive than the former. As a result, the customer will at least be able to choose whether they want to conclude a contract including consent or not. In any case, the option to consent should be separate from the contract (e.g. by clicking a separate box).
Caution is recommended when dealing with children's data. In Austria, only children over the age of 14 can give legally valid consent to the use of their data. A guardian's consent is required for younger children. The data processor is obliged to make all reasonable efforts using available technology to ensure that children under 14 do not give their consent. This could be done, for example, by requiring the person registering online to provide their date of birth, or, in future, by requiring proof of age by way of a digital ID.
4. Profiling – Predicting How a Customer Will Behave
Profiling is generally understood to be the evaluation or prediction of personal aspects of data subjects. Such "aspects" include job performance, financial position, health, personal tastes, interests, reliability, behaviour, and place or change of the person's residence. Profiling is the evaluation of which goods/services a certain customer looks at or purchases on an internet sales platform in order to create an overall picture of their purchasing behaviour and consequently provide meaningful shopping suggestions for other goods/services.
If profiling is done for the purposes of "common" direct marketing, the legitimate interests of the business doing the profiling will usually outweigh those of the person concerned, so that generally speaking, consent will not be required. However, the data subject has a right of refusal.
If profiling involves high intensity intervention, i.e. where there is substantial interference with the data subject's rights, for instance because human dignity is violated, the particular business will need to obtain the data subject's consent. Evaluating sensitive data or the method of price differentiation are examples of high intensity intervention. Price differentiation is when different users are offered exactly the same goods or services at different prices (for example, higher prices for users of Apple products than for users of Android appliances). In such cases, the explicit consent of the data subject is required.
Profiling also requires the data subject's explicit consent when it involves legal consequences for the data subject. For example, using profiling, a bank could evaluate a customer's credit risk and on the basis of the result, approve or refuse a loan. In such cases, data subjects must be informed about the programme logic. They are also entitled to present their positions and contest the decision made on the basis of such profiling.
5. Data Processing for the Purpose of Market Research
The aim of real market research is to gather statistical data using a scientific and methodical approach. Although data relating to individuals is collected, the aim is to be able to make general statements, and not statements regarding individuals.
Market researchers or their clients will usually have a legitimate interest in processing the data, and therefore the consent of the data subject from whom the data is being collected will not be required.
However, the situation is different in cases of so-called "push polling". This is direct marketing disguised as market research, and is also used for dirty campaigning in election campaigns. Under the pretext of doing market research, in actual fact goods are marketed or competitors are made to look as if they were offering goods of low quality. Individuals are contacted and asked questions by a "researcher" claiming to be doing market research, while in fact no real market research is being done. For example, individuals are asked questions in such a way to make the goods of a certain business look bad.
Businesses doing push polling need the consent of the individual being contacted, because they do not have overriding legitimate interests.
In general, direct marketing shall remain possible after May 25th, 2018, when the GDPR and the amendment to the Austrian Data Protection Act will enter into force.
Pursuant to Recital 47 of the GDPR, data processing will continue to be permissible without the data subject's express consent if it is done for the purpose of direct marketing, provided that the legitimate interests of the business override those of the data subject and the data subject has not objected to their data being processed (opt-out).
For businesses in Austria, this means that newsletters can still be sent out by normal post, as long as the recipients are not registered on the Robinson List. Electronic advertising such as e-mails can be sent to customers for the same or similar products or services without the express consent of the recipient.
In all other cases, and when the data processing involves high intervention or the processing of sensitive data, it will be necessary to obtain the voluntary and informed consent of the recipient concerned. The recipient will have to be informed exactly of the purpose for which their data is being collected as well as the legal basis for processing.
This means that businesses will not have carte blanche for direct marketing after May 25th, 2018. In view of the high penalties under the GDPR of 4% of the business' turnover or € 20 million, businesses are advised to take a very careful look at the new legal parameters for direct marketing. However, these very high penalties will not be applicable if "only" the provisions of Article 107 Austrian Telecommunication Act are violated.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.