On June 28, 2018, the Governor of California signed AB 375, the California Consumer Privacy Act of 2018 (the “Act”). The Act introduces key privacy requirements for businesses, and was passed quickly by California lawmakers in an effort to remove a ballot initiative of the same name from the November 6, 2018, statewide ballot. We previously reported on the relevant ballot initiative. The Act will take effect January 1, 2020.

Key provisions of the Act include:

  • Applicability. The Act will apply to any for-profit business that (1) “does business in the state of California”; (2) collects consumers’ personal information (or on the behalf of which such information is collected) and that alone, or jointly with others, determines the purposes and means of the processing of consumers’ personal information; and (3) satisfies one or more of the following thresholds: (a) has annual gross revenues in excess of $25 million, (b) alone or in combination annually buys, receives for the business’s commercial purposes, sells, or shares for commercial purposes, the personal information of 50,000 or more consumers, households or devices, or (c) derives 50 percent or more of its annual revenue from selling consumers’ personal information (collectively, “Covered Businesses”).
  • Definition of Personal Information. Personal information is defined broadly as “information that identifies, relates to, describes, is capable of being associated with, or could reasonably be linked, directly or indirectly, with a particular consumer or household.” This definition of personal information aligns more closely with the EU General Data Protection Regulation’s definition of personal data. The Act includes a list of enumerated examples of personal information, which includes, among other data elements, name, postal or email address, Social Security number, government-issued identification number, biometric data, Internet activity information and geolocation data, as well as “inferences drawn from any of the information identified” in this definition.
  • Right to Know
    • Upon a verifiable request from a California consumer, a Covered Business must disclose (1) the categories and specific pieces of personal information the business has collected about the consumer; (2) the categories of sources from which the personal information is collected; (3) the business or commercial purposes for collecting or selling personal information; and (4) the categories of third parties with whom the business shares personal information.
    • In addition, upon verifiable request, a business that sells personal information about a California consumer, or that discloses a consumer’s personal information for a business purpose, must disclose (1) the categories of personal information that the business sold about the consumer; (2) the categories of third parties to whom the personal information was sold (by category of personal information for each third party to whom the personal information was sold); and (3) the categories of personal information that the business disclosed about the consumer for a business purpose.
    • The above disclosures must be made within 45 days of receipt of the request using one of the prescribed methods specified in the Act. The disclosure must cover the 12-month period preceding the business’s receipt of the verifiable request. The 45-day time period may be extended when reasonably necessary, provided the consumer is provided notice of the extension within the first 45-day period. Importantly, the disclosures must be made in a “readily useable format that allows the consumer to transmit this information from one entity to another entity without hindrance.”
    • Exemption. Covered Businesses will not be required to make the disclosures described above to the extent the Covered Business discloses personal information to another entity pursuant to a written contract with such entity, provided the contract prohibits the recipient from selling the personal information, or retaining, using or disclosing the personal information for any purpose other than performance of services under the contract. In addition, the Act provides that a business is not liable for a service provider’s violation of the Act, provided that, at the time the business disclosed personal information to the service provider, the business had neither actual knowledge nor reason to believe that the service provider intended to commit such a violation.
  • Disclosures and Opt-Out. The Act will require Covered Businesses to provide notice to consumers of their rights under the Act (e.g., their right to opt out of the sale of their personal information), a list of the categories of personal information collected about consumers in the preceding 12 months, and, where applicable, that the Covered Business sells or discloses their personal information. If the Covered Business sells consumers’ personal information or discloses it to third parties for a business purpose, the notice must also include lists of the categories of personal information sold and disclosed about consumers, respectively. Covered Businesses will be required to make this disclosure in their online privacy notice. Covered Businesses must separately provide a clear and conspicuous link on their website that says, “Do Not Sell My Personal Information,” and provide consumers a mechanism to opt out of the sale of their personal information, a decision which the Covered Business must respect. Businesses also cannot discriminate against consumers who opt out of the sale of their personal information, but can offer financial incentives for the collection of personal information.
  • Specific Rules for Minors: If a business has actual knowledge that a consumer is less than 16 years of age, the Act prohibits a business from selling that consumer’s personal information unless (1) the consumer is between 13–16 years of age and has affirmatively authorized the sale (i.e., they opt in); or (2) the consumer is less than 13 years of age and the consumer’s parent or guardian has affirmatively authorized the sale.
  • Right to Deletion. The Act will require a business, upon verifiable request from a California consumer, to delete specified personal information that the business has collected about the consumer and direct any service providers to delete the consumer’s personal information. However, there are several enumerated exceptions to this deletion requirement. Specifically, a business or service provider is not required to comply with the consumer’s deletion request if it is necessary to maintain the consumer’s personal information to:
    • Complete the transaction for which the personal information was collected, provide a good or service requested by the consumer, or reasonably anticipated, within the context of a business’s ongoing business relationship with the consumer, or otherwise perform a contract with the consumer.
    • Detect security incidents; protect against malicious, deceptive, fraudulent or illegal activity; or prosecute those responsible for that activity.
    • Debug to identify and repair errors that impair existing intended functionality.
    • Exercise free speech, ensure the right of another consumer to exercise his or her right of free speech, or exercise another right provided for by law.
    • Comply with the California Electronic Communications Privacy Act.
    • Engage in public or peer-reviewed scientific, historical or statistical research in the public interest (when deletion of the information is likely to render impossible or seriously impair the achievement of such research) if the consumer has provided informed consent.
    • To enable solely internal uses that are reasonably aligned with the consumer’s expectations based on the consumer’s relationship with the business.
    • Comply with a legal obligation.
    • Otherwise use the consumer’s personal information, internally, in a lawful manner that is compatible with the context in which the consumer provided the information.
  • Enforcement
    • The Act is enforceable by the California Attorney General and authorizes a civil penalty up to $7,500 per violation.
    • The Act provides a private right of action only in connection with “certain unauthorized access and exfiltration, theft, or disclosure of a consumer’s nonencrypted or nonredacted personal information,” as defined in the state’s breach notification law, if the business failed “to implement and maintain reasonable security procedures and practices appropriate to the nature of the information to protect the personal information.”
      • In this case, the consumer may bring an action to recover damages up to $750 per incident or actual damages, whichever is greater.
      • The statute also directs the court to consider certain factors when assessing the amount of statutory damages, including the nature, seriousness, persistence and willfulness of the defendant’s misconduct, the number of violations, the length of time over which the misconduct occurred, and the defendant’s assets, liabilities and net worth.

Prior to initiating any action against a business for statutory damages, a consumer must provide the business with 30 days’ written notice of the consumer’s allegations and, if within the 30 days the business cures the alleged violation and provides an express written statement that the violations have been cured, the consumer may not initiate an action for individual statutory damages or class-wide statutory damages. These limitations do not apply to actions initiated solely for actual pecuniary damages suffered as a result of the alleged violation.