U.S. and Europe Hit a Snag in Debate Over Consumer Privacy

U.S. and European officials remain divided over key issues in their battle over consumer privacy policies, even though negotiators had pledged to present an agreement at an international summit beginning today in Bonn.

The squabble stems from a sweeping directive enacted by the European Union last year that is designed to protect its citizens’ privacy in the Digital Age. The directive requires European companies to inform consumers when their data are being collected and how it will be used, among other things. It also bans the transmission of data to any country without “adequate” safeguards.

The United States has been scrambling to make sure it meets that vague standard and to avoid disruption of billions of dollars in trade that depends on the flow of computer data--from payroll records to Internet transactions--across the Atlantic.

Negotiators for both sides said they have made progress but have snagged on several issues, including how privacy protections in the United States can be enforced without following the European example of creating a government agency with the authority to penalize violators.

David Aaron, U.S. undersecretary of Commerce, said in a recent speech that the two sides are “very close to an agreement” but “we have had difficulty in explaining our reliance on industry self-regulation.”

Aaron has been working for 18 months to create a “safe harbor” for American companies that volunteer to comply with a set of privacy standards. Companies that fail to live up to that obligation would be subject to penalties by private watchdog groups and ultimately could be sued and charged with deceptive practices by the Federal Trade Commission.

The Europeans are skeptical. “If I go to the FTC and I’m Mr. Black from Liverpool, will the FTC take steps to obtain redress for me?” asked Gerard de Graaf, a member of the European negotiating team. “The FTC doesn’t have the resources to be that kind of body.”

Negotiators say they hope to have an agreement in place by fall. In the meantime, Europe has pledged not to pursue any enforcement actions against U.S. companies.