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Understanding the European Union’s Data Act

The Data Act, a pivotal legislation recently adopted by the European Parliament and the European Council marks a transformative moment in the European Union’s digital policy. 

What’s happening? Both the European Parliament and European Council have approved a groundbreaking set of rules called the Data Act. It’s all about fair access to and use of data.

Why It Matters: This new law is set to make the EU a front-runner in our data-driven world. It aims to unleash economic potential, boost data trading, and open up new market opportunities. Find out all you need to know below 👇

Background of the Data Act

Proposed by the European Commission on February 23, 2022, the Data Act has been crafted to address the evolving challenges and opportunities in the digital data market. It represents a concerted effort to balance the interests of various stakeholders in the digital domain, from individual users to large corporations.

On November 9, 2023, the Members of the European Parliament adopted the Data Act, a significant legislative step aimed at reshaping the digital landscape in the European Union. Garnering a majority of 481 votes in favor, the Act is set to ensure fairness in the digital environment, stimulate a competitive data market, and make data more accessible. 

This adoption was followed shortly afterward by the European Council’s on November 27, 2023.

What is the Data Act?

As explained in our previous blog post, the Data Act aims to “ensure fairness in the digital environment, stimulate a competitive data market, open opportunities for data-driven innovation and make data more accessible for all”. 

At its core, the Data Act includes several key elements:

Data Portability and Sharing

The Data Act introduces enhanced measures for data portability and sharing. It allows users of connected devices to access and share data generated by these devices with third parties. This provision is expected to lower costs for aftermarket services and spur data-driven innovations like predictive maintenance.

Rules for Data Processing and Relationships

Specific rules govern how third parties process data obtained under the Data Act and outline the relationship between these third parties and the original data holders.

Empowering SMEs

To prevent contractual abuses in data sharing, the Act includes measures to rebalance the negotiating power of small and medium-sized enterprises (SMEs). The European Commission will also develop model contracts to assist companies in drafting fair data-sharing agreements.

Public Sector Access to Private Data

In situations of high public interest, such as natural disasters, public sector bodies are granted the authority to access and use data held by private entities, under specific conditions.

Interoperability and Safeguards

The Act sets out interoperability rules for data and cloud services, enabling users to switch providers effectively. It also includes safeguards against unlawful data transfer and access by non-EU governments.

Clarification on IoT Data

It clarifies that databases containing data from Internet-of-Things (IoT) devices should not have separate legal protection, making IoT-generated data more accessible.

Restrictions on Data Sharing with Gatekeepers

The Act restricts data sharing with entities identified as gatekeepers under the Digital Markets Act.

Enforcement and Penalties 

EU Member States are required to designate supervisory authorities to enforce the Data Act. They are also tasked with defining penalty rules for any infringements, ensuring these penalties are effective, proportionate, and dissuasive. Additionally, EU data protection authorities will oversee the application of certain chapters of the Act, particularly concerning personal data protection.

What is in it for Small and Medium-sized Enterprises?

🤝 The Data Act is a big win for small and medium-sized businesses (SMEs) as it guards them against unfair contract terms. It identifies certain contract clauses as unfair, especially if they give one company too much control, like the power to interpret contract terms on their own. If a clause is considered unfair, it won’t apply to European businesses, including SMEs.

Moreover, the European Commission is working on creating recommended contract templates that are fairer and more balanced, particularly helpful when dealing with larger companies that have more negotiating power. To make this happen, an independent group of experts specializing in business-to-business (B2B) data sharing and cloud contracts will help the Commission. This ensures that SMEs can negotiate data sharing deals on a more equal footing.

What is in it for people and businesses?

The Data Act significantly benefits both individuals and businesses by giving them greater control over their data, especially data generated from connected products like smart appliances or industrial machinery. Currently, it’s often unclear who owns or can use this data, with many manufacturers claiming exclusive rights to it.

Under the Data Act, people and businesses will have enhanced data portability rights, allowing them to easily copy or transfer data across different services. This is particularly relevant for data from smart objects, machines, and devices. For example, a car owner could share data from their vehicle with an insurance company, and this aggregated data could be used to improve digital services like traffic management or identifying accident-prone areas.

Next Steps and Implementation

Official Publication: The regulation will soon be published in the EU’s official journal and will come into effect 20 months later.

New Product Requirements: Certain provisions, particularly regarding new products, will apply 32 months after the regulation comes into force.

In summary, the Data Act is a landmark legislation aimed at enhancing data access and fairness, protecting user rights, and fostering innovation in the EU’s digital market. As the EU prepares for the formal adoption and implementation of the Data Act, understanding its nuances becomes crucial for businesses, consumers, and digital stakeholders. 

📧 Stay informed and engaged as the Data Act ushers in a new era of digital fairness and innovation in the European Union.