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The Battle for Privacy Online

By Andrew Marder - Apr 5, 2013 at 2:04PM

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Companies need your information to make more money, but some regulators are worried that consumers are getting the short end of the stick.

With a track record that includes drive-by data capture, Google's (GOOGL -1.34%) history of privacy protection has come under fire again. This time, six European countries have said that they will be looking into whether the company violated data protection laws with its new privacy policy. As commenters have already pointed out, most of the fines that could be levied would have almost no impact on the search giant. French and British agencies combined could only hit it for a little over $1 million. Without a way to really punish Google, what chance do the investigations have of making a difference?

History of failure
The European Union has had a few high-profile cases in the past. Notably, it sued Microsoft (MSFT -0.23%) for the inclusion of Internet Explorer with the Windows operating system. The argument was that Microsoft wasn't giving customers a chance to choose how they browsed the web. Microsoft was ordered to add a screen giving users the option to choose a browser in all of its future Windows releases.

The company added the screen -- and then took it out. In May 2011, it simply removed the screen and then didn't put it back in. By that point it may not have mattered -- Internet Explorer was splitting the market with Chrome and Firefox by that point -- but it was still a violation of the settlement reached with the EU. As a result of the failure, Microsoft was recently fined $730 million. That's a settlement, and will probably make the company think twice next time. But the real story isn't that Microsoft broke its deal, it's that no one bothered to even check.

Google and Microsoft aren't the only companies in the spotlight. Recent proposals from inside the EU have called for stricter privacy policies across the board. Facebook (FB 1.18%) and other social networking sites could soon be subject to a policy supporting the "right to be forgotten." That would mean giving user a clear view of what information the business held on them, and then allow customers to remove any data they wished to purge.

The reaction from the tech companies has been firm, with Facebook's CFO Sheryl Sandberg reminding the countries that Facebook generated "$15.3 billion in value [for] the European economy" in 2011.The statement came just after the announcement of the new legislation, last year. Now, it's being put to test in the Google case.

The twist
There is a new piece of legislation being debated that would make changing Google's mind a bit easier. While fines are currently limited, the new act would give countries the ability to fine a company for up to 2% of its global revenue. That's a bigger chunk of change, and could be the fire that gets Google boiling. Unfortunately for regulators, the new fines aren't expected to be in place until next year. For now, the smaller penalties will have to do.

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