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California Enacts Consumer Privacy Act

The California Consumer Privacy Act’s swift passage is the result of a compromise reached between the backers of a ballot initiative and California legislators. There are similarities and differences between the Privacy Act and the European Union’s General Data Protection Regulation (GDPR) regime, but one thing that is common to both is the need for covered entities that collect or process the personal data of data subjects to understand what personal data is collected, why it is collected, how it is used, and with whom it is shared – in other words, core information governance principles.

The new law is the most comprehensive state privacy law passed to date. It will go into effect January 1, 2020 and comes on the heels of the GDPR which became effective on May 25, 2018.

Summary of the law

The Privacy Act applies to businesses that collect, sell or disclose for business purposes, personal information collected from consumers and empowers consumers with a number of rights related to the data collected by businesses about them.  Similar to the extraterritorial reach of the GDPR, the Privacy Act applies to any business  – whether or not domiciled in California – that receives data from California residents and meets one or more of the following thresholds: (a) has annual gross revenue in excess of $25 million, (b)  annually obtains personal information of at least 50,000 California residents, and/or (c) it derives 50 percent or more of its annual revenues from selling the personal information of California residents.

Under the act, “personal information” is defined broadly as “any information that identifies, relates to, describes, is capable of being associated with, or could reasonably be linked, directly or indirectly, with a particular consumer or household,” followed by a non-exhaustive list of data types ranging from biometrics to IP addresses.  Specifically, consumers have the right to know the categories and specific pieces of personal information that the business has collected, sold to a third party, or disclosed to another person for a business process.  Consumers also have the right to request that a business not sell their personal information or in some cases to delete their personal information pursuant to a verifiable request.  The act contains exemptions for data covered under Health Insurance Portability and Accountability Act (HIPAA), Gramm-Leach-Bliley Act (GLBA), or the Fair Credit Reporting Act (FCRA), and a number of other statutes.

Businesses that sell consumers’ personal information to third parties are required to provide a notice to consumers informing them that their data may be sold and that consumers have the right to opt out of such sale.   In addition, consumers are to be provided with one or more methods for consumers to exercise their right to request information.  In addition, businesses that sell consumers’ personal information are required to post a clear and conspicuous link on their Internet homepage, titled “Do Not Sell My Personal Information.” The act specifically provides that consumers are not required to create an account in order to exercise their rights.  It also requires that businesses have adequate personnel for handling consumer inquiries and requests.  When consumers exercise their  opt-out right, it will last for 12 months before the business can request the consumer to authorize the sale of the consumer’s personal information.

Consumers may also request that the business delete personal information collected about them unless the data is needed for specific enumerated purposes set forth in the statute.   If the business deletes the consumer’s personal information, it must also direct third parties it shares that data with to do the same.

The new law further provides that businesses cannot discriminate against consumers if they exercise their rights under the Privacy Act, but also allows businesses to offer financial incentives, including payments to consumers as compensation, for the collection, sale, or the deletion of personal information.  Businesses must notify consumers of the financial incentive program and give them the opportunity to provide opt-in consent.

The Privacy Act also provides a limited private right of action for violations and statutory damages for certain data breaches resulting from a lack of reasonable security.

Finally, the act encourages the Attorney General to solicit broad public participation to adopt regulations to further the purposes of the act which would have been more difficult through the ballot measure process. The ballot measure, which had garnered enormous support and was set to appear on the November ballot, was withdrawn at the eleventh hour to create this compromise Privacy Act.

The Privacy Act is expected to have significant impact on California businesses who collect personal information, but it is reasonably clear that there are likely to be further refinements to the definitions, requirements, and exemptions.  

©2018 Drinker Biddle & Reath LLP. All Rights Reserved


About this Author

Katherine Armstrong, Drinker Biddle Law Firm, Washington DC, Data Privacy Attorney

Katherine E. Armstrong is counsel in the firm’s Government & Regulatory Affairs Practice Group where she focuses her practice on data privacy issues, including law enforcement investigations, and research and analysis of big data information practices including data broker issues.

Katherine has more than 30 years of consumer protection experience at the Federal Trade Commission (FTC), where she served in a variety of roles, including most recently as a Senior Attorney in the Division of Privacy and Identity Protection.  In the Division of...