The Big Story: EU, U.S. negotiating on “enhanced” data transfer pact. The United States and the European Union are discussing the formation of a new transatlantic data transfer pact to replace the Privacy Shield framework struck down by Europe’s top court last month. In a joint press statement released on Monday, Commerce Secretary Wilbur Ross and European Commissioner for Justice Didier Reynders said that they “have initiated discussions to evaluate the potential for an enhanced EU-U.S. Privacy Shield framework to comply with the July 16 judgment.”
Privacy Shield allowed U.S. firms to process and store European users’ data in America, but the Court of Justice of the European Union announced that current U.S. law is too weak to adequately protect EU citizens’ data from outside surveillance. The ruling was based on U.S. government surveillance programs that give officials wide access to digital communications, and which the court found run counter to the EU’s strict data privacy protections. While Federal Trade Commission Chairman Joseph Simons told a Senate panel last week that U.S. firms must still comply with the invalidated framework, many small- and medium-sized businesses fear growing liability by relying on the now-defunct pact. Indeed, some companies are already storing European users’ data in the EU to avoid any legal fallout.
U.S. startups stand to lose the most without a clear framework for complying with the EU’s data privacy requirements. While many larger firms can rely on individual data transfer agreements outside of the Privacy Shield framework—known as Standard Contractual Clauses (SCCs)—the pact provided startups with a straightforward method for handling and storing European users’ data. And unlike firms that are moving to store users’ data within the EU, most startups lack the resources needed to store data within the bloc. As a result, growing startups might be forced to abandon the European market as they wait for regulatory clarity.
While it’s good that EU and U.S. officials have begun discussing the framework for a new data transfer pact, policymakers need to move quickly to mitigate the harm that the loss of Privacy Shield will have on startups. Of course, this is the second time that the European Court of Justice has rejected an EU-U.S. data transfer pact on the grounds that the U.S.’s permissive government surveillance rules violate EU law, so it’s hard to see how U.S. officials can address European concerns without overhauling existing U.S. surveillance programs. If you’re a startup that has been impacted by the decision to strike down Privacy Shield, please contact us here.
Policy Roundup:
Congressional Startup Day 2020. More than 40 members of Congress and over 100 entrepreneurs held meetings this week as part of Congressional Startup Day, a nationwide celebration of startups and entrepreneurship. This annual, bipartisan event serves as an opportunity for entrepreneurs and lawmakers to discuss the challenges, opportunities, and successes of the nation’s startup community. Many of the meetings included discussions about how Congress can work to reduce barriers to entrepreneurship across the country. In an op-ed for Fortune, Congressional Startup Day co-chairs Sens. Catherine Cortez Masto (D-Nev.) and Tim Scott (R-S.C.) discussed the importance of entrepreneurs to the U.S. economy and said that “startups deserve support and attention as we work to revitalize our economies in the wake of the coronavirus pandemic.”
U.S., Chinese trade talks still moving forward. Upcoming negotiations between U.S. and Chinese officials over a trade deal will reportedly include discussions about President Donald Trump’s recent executive orders banning popular social media apps TikTok and WeChat from operating in the country. Although President Trump signed a phase one trade deal with China earlier this year, negotiations have broken down in recent months as a result of deteriorating U.S.-China relations and the fallout from the coronavirus pandemic. White House economic adviser Larry Kudlow said this week that, despite the increase in tensions, the trade deal was “fine” and that Beijing promised to continue implementing the phase one agreement.
California judge orders Uber and Lyft to comply with AB 5. A California judge ruled this week that Uber and Lyft must reclassify their drivers as full employees as a result of a state measure—Assembly Bill 5 (AB 5)—signed into law last year. Engine and several other organizations filed an amicus brief earlier this year in a different case addressing AB 5, warning the court about the unintended harm that the law would have on startups and entrepreneurs across California.
Tech industry challenges White House’s suspension of visas for foreign workers. A group of U.S. tech firms, including Facebook and Amazon, filed a legal brief this week challenging President Trump’s June proclamation that suspended the issuance of work visas—including those issued under the H-1B program—to high-skilled foreign workers through the end of the year. Last month, Engine led a letter signed by 118 startups, entrepreneurial organizations, and tech companies that asked the Trump administration to reconsider its suspension by highlighting the impact the decision would have on U.S. startups. As we noted in the letter, companies of all sizes need to be able to access talent from across the world in order to “advance new technologies and keep America at the forefront of global innovation.”
DOJ asks court to dismiss lawsuit challenging Trump’s social media order. The Department of Justice filed a motion this week asking the U.S. District Court for the District of Columbia to dismiss a lawsuit from the Center for Democracy and Technology challenging President Donald Trump’s May executive order on “preventing online censorship.” The executive order pushes federal agencies to clarify the legal meaning of “good faith” content moderation by reviewing Section 230 of the Communications Decency Act—the 1996 law that provides limited legal protections to digital platforms that host and moderate user-generated content. The CDT lawsuit said that the president’s order violates the First Amendment rights of Internet firms and will chill online speech. The Federal Communications Commission moved last week to request public feedback following the administration’s petition for the agency to review Section 230. As we recently noted, the law has allowed companies of all sizes to grow and innovate online, and changes to the law would disproportionately impact startups that rely on the liability limitations to host and moderate user content.
Startup Roundup:
#StartupsEverywhere: Raleigh, North Carolina. Studies have repeatedly shown that women founders face greater obstacles to funding and investment opportunities than male business owners. Tired of the lack of opportunities for women entrepreneurs, Cindy Foy-Uhlir decided to do something about it by launching Fierce Female Founders to support women founders as they seek to grow their startups and realize their dreams.
