By Marcus Vass and Pearl Lam
Personal Data (Privacy) (Amendment) Ordinance 2012 – new regulatory regime for direct marketing
After 18 months of uncertainty, we now have the revisions to the privacy laws. These will impact all significant business operations in Hong Kong. What does that mean for your business?
The Personal Data (Privacy) (Amendment) Ordinance 2012 (the "Amendment") was published on the Government Gazette on 6 July 2012. The Amendment has imposed a more stringent regulatory regime than under the Personal Data (Privacy) Ordinance ("PDPO") including:
- new requirements for use and provision (i.e. sale/ transfer) of personal data for direct marketing;
- introduction of a new offence for the disclosure of personal data;
- implementation of a data user return scheme;
- greater powers to the Privacy Commissioner (the '"Commissioner") to issue enforcement notices; and
- empowering the Commissioner to provide legal assistance to aggrieved data subjects.
What does this mean for your business?
It is now far easier for data subjects (i.e. customers etc) to take action against users (i.e. companies). Corporate data users are recommended to take the following preparatory actions:
- Audit whether existing data subjects have properly consented to the use of their data for direct marketing.
- Review whether proper consent has been given for any personal data provided by third parties.
- Investigate whether any free-of-charge channel for data subjects to communicate consent is currently in place.
- Ensure proper systems are in place to record consents and to send written confirmation to data subjects if verbal consents are obtained.
- Review data processing and contractual arrangements with third party service providers to ensure the data processors comply with the Amendment, e.g. telemarketers and email blasting.
- Review sales & marketing contracts to reflect the Amendment.
- Assess scope of existing marketing activities and review/ update the Personal Information Collection Statement to ensure compliance with the Amendment.
- Prepare for DURS - review record-keeping practices regarding the collection, use and transfer of personal data to ensure compliance with the requirements under DURS.
- Update/prepare the internal data protection manual to educate employees (in particular the sales & marketing business) on new compliance requirements.
We would be happy to assist you with any of these areas.
The Amendment will come into operation on 1 October 2012 except for the provisions regarding direct marketing, legal assistance and court jurisdiction. The new changes relating to direct marketing are expected to commence in 2013 ("DM Commencement Date") to allow time for corporate data users to prepare for the transition.
The Amendment has introduced new concepts and it is also expected that the Commissioner will publish guidance notes on the practical implementation of the new direct marketing provisions.
Use of Personal Data for Direct Marketing
The major changes under the Amendment relate to direct marketing. The Amendment has introduced new requirements for data users to give data subjects an informed choice as to whether to allow the use of their personal data in direct marketing. Data users are required to comply with more onerous notification requirements prior to the use of personal data for direct marketing purposes including:
- informing the data subjects (1) as to the intention of the data users to use the personal data for direct marketing purposes and (2) the data users may not use the personal data unless it has received the data subject's consent to do so;
- providing information on the kinds of personal data to be used and the classes of marketing subjects in relation to which the data is to be used; and
- notifying the data subjects when using personal data in direct marketing for the first time.
Data users who use a data subject's personal data without taking the above actions will be liable upon conviction to a fine of HK$500,000 and 3 years' imprisonment.
Grandfathering and Third Party exceptions
The 'grandfathering' provisions are helpful but contain significant limitations. Two exceptions to the new direct marketing requirements are introduced under the so-called grandfathering arrangement and the third party exception. The grandfathering arrangement provides that a data user can continue to use the personal data after the DM Commencement Date without taking any actions in relation to the new direct marketing consent requirements provided that certain conditions are fulfilled.
The third party exception permits a data user to use personal data which is provided by a third party without fulfilling the new consent obligations provided that the third party has provided certain notifications to the data user.
Provision (i.e. transfer / sale) of Personal Data to Third Parties for Use in Direct Marketing
Where data users intend to provide (i.e. transfer or sell) personal data to a third party, they must inform the data subjects in writing that they intend to so use the personal data and they may not provide the data unless they received the data subjects' written consent to the intended provision (note that unlike the restrictions on using personal data for direct marketing, oral consent will not suffice). Consent, for the purposes of the new requirements, includes an "indication of no objection" to the use or provision of personal data. Data users must also provide written information if the data is to be provided for gain.
Failure to comply with each of the above requirements constitutes an offence, and the data user is liable on conviction - (i) if the data is provided for gain, to a fine of HK$1 million and imprisonment for 5 years; (ii) if the data is provided otherwise than for gain, to a fine of HK$500,000 and imprisonment for 3 years.
Employee Disclosure without Consent from Data User
The Amendment introduces a new offence where a person (e.g. an employee of a data user) discloses personal data of a data subject that was obtained from a data user without the data user's consent: (i) with an intent for gain, or to cause loss to the data subject; or (ii) where the disclosure results in psychological harm to the data subject. These offences shall attract fines of HK$1 million and 5 years' imprisonment.
Data User Return Scheme
The Amendment provides for the implementation of a Data User Return Scheme ("DURS"). Under DURS data users will be required to submit an annual return detailing the personal data they control and the purposes of collection or processing of such data. Data users will be liable to a fine of HK$10,000 and imprisonment for up to 6 months.
The Commissioner will keep a Register of Data Users, which is a database that contains all the information submitted annually by data users. The register will be available to the public for inspection and will give data subjects an opportunity to understand data users' privacy practices and compare them with the practices of other data users. It was proposed that DURS will be rolled out in three consecutive phases, covering: i) firstly, the public sector; ii) secondly, three large regulated industries (banking, telecommunications and insurance) and iii) thirdly, organizations with a large database of members (such as customer loyalty schemes). However, it is not clear how the third category is to be determined and the exact timeframe for the implementation of DURS has yet to be announced.
The Amendment empowers the Commissioner to issue an enforcement notice where an investigation reveals that the data user has breached the PDPO. This removes the current requirement under the PDPO whereby the PCPD is empowered to issue an enforcement notice for breaches of PDPO only in circumstances where the breach is continuing, likely to continue or be repeated.
The enforcement notice would specify steps that the data user must take to remedy, and if appropriate, prevent any recurrence of the contravention.
Failure to abide by the enforcement notice is liable on first conviction to (i) fine of HK$50, 000 and 2 years' imprisonment; and (ii) daily penalty of HK$1, 000 for each day the offence continues after conviction. On second or subsequent convictions failure to abide by the enforcement notice is liable to (i) fine of HK$100, 000 and 2 years' imprisonment; and (ii) daily penalty of HK$2, 000 for each day the offence continues after conviction.
Additionally, a data user who, having complied with a enforcement notice, intentionally does the same act or makes the same omission in violation of the of the PDPO, as specified in the enforcement notice, is liable on conviction to (i) fine of HK$50, 000 and 2 years' imprisonment; and (ii) daily penalty of HK$1, 000 for each day the offence continues after conviction.
The Amendment empowers the Commissioner to provide legal assistance to aggrieved data subjects who intend to institute legal proceedings against a data user to seek compensation under the PDPO, including providing advice to the aggrieved data subject or arranging for legal representation. This can potentially open the floodgate for questionable data privacy claims.
The Amendment does not introduce direct regulation of data processors, but rather requires data users to use contractual and other means to ensure that personal data is protected from unauthorized or accidental access, processing, erasure or loss, and is not retained for longer than necessary for the purpose of processing the data.
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.