Understanding California’s New Consumer Privacy Law

The California Consumer Privacy Act (CCPA) will grant California residents new privacy rights when it takes effect on January 1, 2020, making it one of the boldest digital privacy laws in the U.S. Canadian companies that do business in California or have clients there should start preparing now. CCPA was enacted on June 28.

What You Need To Know

• CCPA gives California consumers new data privacy rights allowing them to learn about what personal information businesses have collected and what it is used for, as well as to control how it is used, including being able to opt out of having their data sold.
• CCPA includes a statutory damages framework that could result in severe cost consequences if an organization violates its provisions. For example, CCPA provides a private right of action for personal information security breaches, with the possibility of statutory damages between US$100 and US$750 per consumer, per incident.
• Given CCPA's scope and the size and importance of California's economy and population, many companies, even those outside the U.S., will be subject to its requirements and should start planning ahead of time, before CCPA comes into effect on January 1, 2020.
• While there is some overlap between CCPA, the EU's GDPR and Canada's PIPEDA, there are significant differences, which means compliance with GDPR and/or PIPEDA does not equate to compliance with CCPA. Accordingly, organizations should create a comprehensive privacy approach that also addresses CCPA's unique requirements.

Legislative Background

CCPA was passed after just one week of legislative debate. California's legislature rushed CCPA through as part of a deal to avoid a costly fight over a proposed ballot initiative that was being championed by privacy activists. The ballot initiative would have put in place even more stringent requirements, and it had strong support stemming from the growing frustration over an ever-growing number of data breaches and privacy scandals, such as the one involving Cambridge Analytica.

In light of CCPA's quick legislative passage, it is expected that public consultations will result in a series of corrections, refinements and amendments before the legislation comes into effect. Organizations should ensure they keep up-to-date with changes to CCPA in this interim period to ensure their strategies and plans remain compliant.

CCPA's Scope

CCPA applies to any organization that collects and controls the personal information of "consumers"—defined as natural persons who are California residents—whether or not that information is collected electronically, does business in the State of California, and it satisfies one or more of the following conditions:

1. has an annual gross revenues in excess of US$25,000,000;
2. annually buys or receives for the business' commercial purposes, sells or shares for commercial purposes, alone or in combination, the personal information of 50,000 or more consumers, households or devices; or
3. derives 50% or more of its annual revenue from selling California residents' personal information.

CCPA also applies to any entity that "controls or is controlled by" the above described organization (i.e., any corporate affiliate).

CCPA's Key Provisions

Consumer Rights

The CCPA grants consumers the following categories of rights:

1. Right to Know: This gives the consumers the right to know what personal information an organization is collecting, where it was sourced from, why they are collecting it, and whether it is being disclosed or sold, and to whom. Companies can comply by providing this information through a general privacy policy, with specifics to be made available upon request by a verifiable consumer.
2. Right to Access: This guarantees a consumer the right to access a copy of the "specific pieces of personal information that [a business] has collected about the consumer." The information must be delivered by mail or electronically.
3. Right to Opt Out: This allows consumers to opt out of the sale of their personal information to third parties. Organizations must post a "clear and conspicuous link" entitled "Do Not Sell My Personal Information" on their national or California specific webpage (if they have one), as well as describe, in their privacy policy, the consumer's opt out rights and provide a link to the opt out page.
4. Right to Deletion: This gives consumers the ability to request that an organization delete their personal information, with certain exceptions.
5. Right to Equal Service: This ensures consumers receive equal service and pricing from an organization, even if they exercise their privacy rights under the CCPA. Interestingly, an organization can charge different prices or provide a different level of service to individuals based on their privacy selections, but only to the extent that the difference is "reasonably related to" the value provided by the consumer's data.

If the business offers financial incentives for consumers to provide personal data, the business must notify individuals of the financial incentives, the consumer must expressly opt in to the program, and the consumer must be able to opt out at any time. An organization must ensure its financial incentive practices are not viewed as unjust, unreasonable, coercive, or usurious in nature.

Public Enforcement

Violations of the CCPA can be enforced by the California Attorney General, subject to a 30-day window for the organization to cure the violation. The CCPA outlines the following statutory penalties:

• Up to US$2500 per violation could be imposed on an organization that did not cure the violation within the 30 day window; and/or
• Up to US$7500 per violation for intentional violations, in addition to the US$2500 penalty.

The term "violation" is not defined in the CCPA and it is unclear whether it would mean "per incident per customer" or merely just "per incident."

Consumer's Private Right of Action: Liability for Data Breaches

In cases of a data breach, consumers have a private cause of action under the CCPA. Specifically, consumers can bring a private action, either individually or as a class, against organizations for the unauthorized access or exfiltration, theft or disclosure of a consumer's sensitive personal information as a result of the organization's failure to implement and maintain the required reasonable security measures. ("Sensitive personal information" is more narrowly defined here than under the rest of the CCPA.)

The CCPA provides for statutory damages of US$100-$750 per customer per incident or actual damages, whichever is higher. Interestingly, liability does not appear to require showing actual consumer harm. Statutory damages are sufficient.

Where there is no actual harm, consumers must provide the organization with a written notice identifying the specific CCPA violation(s). An organization then has a 30-day cure period. If the violation is not cured, the consumer can proceed with the action. A consumer must also notify the California Attorney General within 30 days of commencing an action. The California Attorney General can then: (1) elect to prosecute the action instead; (2) notify the consumer not to proceed with the action; or (3) not respond at all within 30 days, in which case the consumer will be allowed to proceed with their action.

Comparisons Between CCPA and PIPEDA

Even though there are some similarities between CCPA and the Personal Information Protection and Electronic Documents Act (PIPEDA), such as the right to access personal information, there are key differences. For instance, the CCPA allows for a general right to deletion of personal information. In contrast, under PIPEDA there is no such general right to erasure per se, though organizations may only retain personal information as long as necessary to fulfil the purposes for which it was collected. While there is a right to portability under the CCPA, there is no such corresponding right under PIPEDA. Another difference is the way in which an organization must handle complaints and inquiries. The CCPA outlines specific methods of communications that organizations have to provide consumers such as at minimum a toll-free number and a website. PIPEDA does not contain any specific requirements, just a requirement that the complaint procedure be "easily accessible and simple to use."

Put more simply, compliance with PIPEDA does not ensure that organizations will be CCPA complaint. Organizations will need to develop a holistic approach that also addresses the unique requirements under CCPA.

Comparisons Between CCPA and EU's GDPR

While CCPA has been referred to as "mini-GDPR," the comparison is misleading. Even though there are some similarities between the two legislative frameworks, there are many substantive differences, some of which are explained below.

• GDPR is an omnibus law that provides a holistic privacy regime; the CCPA is not. Not only does GDPR cover disclosure requirements companies must make to data subjects, it covers a wide variety of actors and situations such as procedures for data breach notification, cross-border data transfers and more. CCPA has more of a limited focus, mainly on consumer privacy rights and disclosures made to consumers.
• Unlike GDPR, the CCPA does not require organizations to obtain consent prior to processing consumers' personal information. It only requires organizations to offer the opportunity to opt out of a single specific use of their data (i.e., the sale of their personal information).
• CCPA expands the definition of personal information to include "households," while no similar concept is covered by GDPR.
• While the CCPA and GDPR both provide rights of access and deletion, only the GDPR provides a right of rectification or broad right of objection.

These differences highlight the fact that being compliant with GDPR does not ensure compliance with CCPA. Organizations should develop an inclusive privacy strategy that takes CCPA's requirements into consideration, including putting mechanisms in place where GDPR and CCPA's requirements conflict, such as their approaches to consumer consent.

To discuss these issues, please contact the author(s).

This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.

For permission to republish this or any other publication, contact Janelle Weed.

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