How U.S. spying hurts Google and Facebook

By Leonid Bershidsky
Courtesy of the Associated Press

October 25, 2013 (c) 2013, Bloomberg News.

President Barack Obama must wish digital communications were never invented. In addition to the embarrassing healthcare.gov mess, he has to handle phone calls from irate European allies who see U.S. electronic spying on their turf as a breach of trust. Comical as such diplomatic tussles may seem, they carry a very real threat for U.S. Internet companies serving European markets.

There was not much Obama could tell a bristling French President Francois Hollande or an outraged German Chancellor Angela Merkel. The French and German sides reported the calls differently than did the White House. They stressed their respective leaders' tough questions, while the United States played up Obama's soothing but noncommittal responses. He told Hollande that some of the news media reports on U.S. electronic surveillance in France contained unspecified distorted information and stopped short of denying that the National Security Agency ever tapped Merkel's phone, saying only that it was not doing so now and had no such plans for the future.

Overall, the U.S. stance seems to be that the Europeans should calm down and treat U.S. spying as mundane. As National Security Council Spokeswoman Caitlin Hayden put it, "As a matter of policy we have made clear that the United States gathers foreign intelligence of the type gathered by all nations."

There is a rationale behind telling European leaders "OK, we're friends, but our intelligence services do what they have to do, so please shut up about it already." France and Germany will not break up their partnership with the U.S. to embrace Russia or China.

So Edward Snowden, the former NSA contractor who caused all the unpleasantness, may not have done much damage to the U.S. political relationship with the European Union. His revelations, however, may force U.S. companies like Google and Facebook to change the way they operate in Europe and perhaps globally.

On Oct. 22, the European Parliament's civil liberties committee approved two proposals by the European Commission to enhance EU citizens' digital privacy. The proposals had been on the books since last year, but their passage has been slowed by intensive lobbying on the part of large Internet companies. Now, they are on the agenda of an EU summit this week, and it is likely that they will be approved next year.

The reform includes Europeans' "right to be forgotten," obliging digital service providers to delete a user's personal information upon request. They will also have to forward the user's request to other companies that had access to the data. Internet companies won't be able to refuse service to users who don't provide personal data not strictly needed for the particular service. User profiling will be subject to a person's consent.

If adopted, the regulations will wreak havoc on the ability of Google, Facebook and other Internet companies to target advertising to specific users, destroying the foundation of their business models. They will also have to build user consent mechanisms into their products' code.

In a special provision meant to hinder U.S. intelligence gathering through American companies — which, according to Snowden's revelations, have aided the NSA — the proposed EU rules require Internet companies to ask permission from the national data protection authority of a European country before passing any information on its citizens to third countries.

Fleur Pellerin, the French junior minister in charge of small business and the digital economy, has been pushing the new rules for months. She would like to go much further, eventually taxing U.S. Internet companies in every country where their services are used. So far, France's notorious distaste for large U.S. Internet companies has not been enough to jolt the EU bureaucratic machinery into action. Now, with Germany involved in the U.S. digital spying scandal on a deeply personal level — Americans dared to spy on Mutti Merkel, the nation's mother figure — the new privacy rules face much better prospects.

Perhaps Obama has other things on his mind now, but he ought to be more forthcoming with his European partners, offering them some serious guarantees against NSA intrusiveness rather than insipid and evasive answers to their questions. Otherwise the very companies the U.S. administration has reportedly asked to help fix Obamacare will suffer for the U.S. government's sins.

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Leonid Bershidsky, an editor and novelist, is a Bloomberg View contributor.