EU seeks new powers to peek into ‘sensitive’ corporate information

The European Commission on Tuesday (2 May) unveiled a proposal that could significantly expand its powers to request access to sensitive corporate data as a way to enforce EU single market rules or to inform new pieces of legislation.

Companies have voiced opposition to the proposal, arguing it would force them to disclose “sensitive” business information to EU authorities upon request.

If the proposal goes through, firms which refuse to comply could be fined up to 1% of their turnover from the previous year, on top of a possible fine of up to 5% of daily turnover.

The proposed Single Market Information Tool is part of a legislative package designed to improve the functioning of the EU’s single market.

In “targeted” cases, when neither national authorities or the companies involved have voluntarily provided the information, the Commission would be able to request the data directly from the firms.

Officials explained this would be needed only in a very limited number of cases, around 1% of the total.

Asking Google for its algorithm

One example is the use of unjustified geo-blocking practices by online services. Some of the information needed to regulate these services should be based “on detailed price and cost data which only service providers possess”, according to EU legislators.

Asked if valuable corporate secrets, like Google’s search algorithm, could also fall under the scope of the new information tool, an official confirmed that it could be the case “but seems highly implausible”.

“Asking for Google’s search algorithm could theoretically fall under its scope, but seems highly implausible, an official explained.”

The European Commission says it needs deeper inside knowledge of some industries in order to inform new EU laws. If legislation is based on incomplete information, it could potentially “harm” the industries concerned, it argues, saying that even a marginal improvement in the level of detail could have “enormous benefits” for an entire industry.

In the case of geo-blocking, 1% of revenues of copyright-intensive industries adds up to more than €9 billion.

Three-step approval

Limits would be placed on the Commission’s new discretionary powers, along with a three-step approval process. When a company does not reply to a request, or when the response is unsatisfactory, Brussels could insist a second time that if there is no response, if the answer comes late or is unsatisfactory, it could then ask for sanctions.

European Commission officials played down the risk of penalties, saying that the executive already has the authority to request information from companies directly in competition cases.

The Commission has fined various companies in the past for failing to cooperate or providing misleading information on merger cases. Tetra Laval, a Swiss-Swedish carton packaging company, was fined €90,000 in 2004, and Deutsche BP €35,000 in 2002.

No company has been sanctioned since merger rules were strengthened in 2004. However, the executive is investigating Facebook for providing misleading information on its buyout of WhatsApp.

The Commission expanded its powers to request information to state aid cases in 2013, on the back of revelations regarding the ‘sweetheart’ deals EU governments sometimes offer multinationals.

But the executive has so far only used its new competences in state aid cases against Starbucks and Fiat.

During preliminary discussions in Council working groups, member states asked for a say in the process. As a result, the draft proposal foresees that the executive would notify every request for information from companies. However, governments would have access to the information only if the process ends up in an infringement procedure before the European Court of Justice and only if the information is not confidential.

Member states were also concerned that the proposal could be burdensome for the private sector. The European Commission argued that it would not use it indiscriminately. It will be a “very infrequent” tool, an official assured, saying small companies with less than ten employees or a turnover below €10 million will be excluded.

The Commission also stressed that the information provided would be treated confidentially, applying the same practices used in competition cases.

‘Serious concerns’

But despite the executive’s guarantees, the private sector remained critical.

“We have serious concerns,” said the Director General of BusinessEurope, Markus Beyrer.

In a statement, the organisation said that the new information tool could lead to “unacceptable risks regarding highly sensitive business information,” without clear justification or explanation of how the European Commission intends to use it.

BusinessEurope and Eurochambres, the umbrella organisation for small and medium-sized enterprises in Europe, agreed that this new instrument would represent an additional burden to companies.

Eurochambres described the proposal as “misdirected”, saying member states are to blame for outstanding barriers in the single market, not companies.

“The Commission is kidding itself if it thinks that a lack of commercial data is the root cause of single market malfunctions. It is member state administrations that regularly fall short in implementing requirements,” said Arnaldo Abruzzini, CEO of Eurochambres.

“The recent struggle for the Commission to get reliable data from car manufacturers about their emissions practices are a case in point. This could be a decisive tool to tilt the scale in favour of consumers and the companies who play by the rules,” said Monique Goyens, director general of the European Consumer Organisation (BEUC).