October 6, 2008

EU in Standoff With American Search Engines Microsoft, Google and Yahoo Don’t Follow European Limits for Personal Data Storage

By Kevin J. O'Brien

For more than a year, European data privacy officials have been battling with U.S.-based Internet search engines, trying to get them to conform to European restrictions on the storage of personal information gleaned from the Web.

Now, as the U.S. titans Google, Microsoft and Yahoo continue to retain personal data beyond the six-month time limit established this year by the European Commission, regulators say their patience is running thin.

"For the moment, Google refuses to submit to European data protection law," said Alex Turk, the French data protection chief, who is also the chairman of a European Commission working group on the issue. "Despite some progress, significant work must still be carried out to guarantee the rights of Internet users and to ensure the respect of their privacy."

The dispute centers on the search engines' practice of collecting demographic details from users, which the Internet companies argue is needed to fine-tune searches, guard against fraud and aim relevant advertising at Web surfers.

That practice has raised concerns on both sides of the Atlantic. In the United States, four members of Congress began a review of industry practices in August, while the U.S. Federal Trade Commission is developing voluntary guidelines. For now there are no time limits on data retention in the United States.

In Europe, where 221 million people made 24.6 billion searches in the month of March alone, according to the research firm comScore, regulators want Internet companies to discard these data after six months. Google recently agreed to cut in half its retention time, to nine months. Yahoo and Microsoft's MSN Live Search hold such data for 13 months and 18 months, respectively.

Turk, whose panel met with other data privacy officials last week, said he planned to hold a hearing in December with representatives of Google and other Internet companies to try to end the impasse.

Some other European officials say privately that if Google, Microsoft and Yahoo do not yield, they will consider imposing fines at a national level or asking the commission, the executive arm of the European Union, to open an antitrust investigation.

"We are working to get voluntary cooperation from Google and the other search engines, but our patience is not endless," said a national EU data protection chief who insisted on anonymity because of the sensitivity of the negotiations. "If Google and others continue to ignore EU law and gain an unfair advantage over companies based in the EU which follow the law, then one could argue that that is a competition issue."

Such an escalation seems unlikely in the short term, since other data protection officials are talking about giving negotiations a chance.

Ireland's data protection chief, Billy Hawkes, has led the negotiations with Google, which has its European headquarters in Dublin. "It is important that this dialogue continue with us and with other data protection authorities," Hawkes said in a statement. "We will continue to work with Google to assist it in meeting its objective of operating in full compliance with European data protection law."

Jacob Kohnstamm, the Dutch data protection chief and vice chairman of the working party, described the panel's decision to give search engines six months to retain data as "generous."

"While there is clearly a positive sphere around the debate, we are not where we want to be," he said.

Google, the dominant search engine, with nearly 80 percent of the search market, according to comScore, is also striking a conciliatory tone.

Peter Fleischer, Google's global privacy counsel, said he was confident that talks with European regulators would produce a compromise, saying Google wanted to avoid an adversarial stance with regulators - an allusion to the costly, decade-long antitrust battle that Microsoft fought with European regulators over its Windows operating system software.

"We are committed to a constructive dialogue with European regulators," Fleischer said during an interview. "We have watched other U.S. companies have a history of confrontation and want to avoid that. We have responded constructively and concretely to European regulators and hope that is taken into consideration."

Shar VanBoskirk, an analyst at Forrester Research in Cambridge, Massachusetts, said shorter retention times could hinder efforts to continue honing search engines, potentially affecting ad revenue. "That would have an effect on the sophistication of the profiles, which would affect the basic business model," VanBoskirk said.

Both Yahoo and Microsoft declined to say whether they would shorten their data retention periods.

Kelley Benander, a spokeswoman for Yahoo in Sunnyvale, California, said the company's 13-month limit struck the right balance between privacy and the ability to develop the search engine.

"We continue to engage in a thoughtful dialogue with regulators and legislators in the EU and the U.S. about the best practices for protecting user privacy while improving our leading set of Internet services," Benander said.

Rickard Andersson, a Microsoft spokesman in London, said the way in which data was rendered anonymous and untraceable was as important as any time limit. "We will have more to share in the next few months," he said.

But some smaller European-based search engines that delete personal data more quickly say it is unfair of the American companies to hold out.

"It is our policy to follow European privacy guidelines," said Robert Beens, the chief executive of Ixquick.com, a search engine company based in Zeist, the Netherlands, that eliminates all traces of individual queries within 48 hours. "As a result, the value of the information we derive for advertisers is not as great as that of our competitors, who use the extra time to develop more detailed profiles. We have a slight competitive disadvantage as a result."

As the search engines prepare for the hearing in December, the EU telecommunications and media commissioner, Viviane Reding, urged the industry to work toward a compromise. Like the data privacy regulators, Reding was reluctant to speculate on what could happen next, should the negotiations fail.

"We always try first to solve problems in a nonimposed way," she said. "But the European regulations are there for everybody. In our internal market, we have to have rules so that there is a level playing field. It is very clear that European laws have to be applied."

Originally published by The New York Times Media Group.

(c) 2008 International Herald Tribune. Provided by ProQuest LLC. All rights Reserved.