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Enormous data protection fine imposed by the HDPA

On 18 May 2020, the Hungarian Data Protection Authority („HDPA” or „Authority”) has imposed a fine of HUF 100 000 000 on DIGI Távközlési és Szolgáltató Korlátolt Felelősségű Társaság („Digi” or „Company”).
The decision has been published by the Authority today, which is by far the highest amount imposed since the GDPR’s entry into force and the existence of the HDPA. The facts leading to the fine and the subsequent decision of the Authority are summarized as follows:

Facts of the case

1. Due to a prior loss of data, Digi created a test database for the purposes of mitigating errors, which the Company filled with existing personal data. The test database was originally available on the Company’s website only with appropriate authorization.

2. The content management system (‘CMS’) applied by the Company had a vulnerability, which has been detected more than 9 years ago. This vulnerability can also be detected and amended automatically by adequate tools and applications. Through this vulnerability, anyone could view the test database without access authorization.

3. Exploiting this vulnerability, an ethical hacker gained access to the test database, where the personal data of a significant number of clients were stored in plain text without any encryption. These data included all personal identifying data, ID card numbers, and in some cases personal identification numbers, e-mail addresses, telephone numbers and bank account numbers were also included.

4. In addition to the above, data of newsletter subscribers and full access system administrators were also accessible through the vulnerability, which could have been used by an attacker to take over complete control of the website and access any personal data or trade secret available on the website.

Findings of the HDPA

The categories of personal data involved made identity theft possible for a potential attacker.

• It is also an aggravating circumstance that the number of people affected by the data protection incident is significant, even in relation to the entire population of Hungary, the Company’s market position would have justified the application of more serious data security measures.

• The vulnerability in the open source content management system has been known for a long time, and a fix is available to fix this vulnerability for free.

• Lack of encryption increased the risk of the incident, even though the Company would also have had the opportunity to encrypt its data for an insignificant cost.

Leaking access credentials for full system administrators severely increases security risk.

• The maintenance of the test database violated the principles of the GDPR, as the test database should have been permanently deleted once its purpose has been fulfilled.

• The Company has also violated the provisions of its own internal regulations.

In light of all of the above, the Authority considered that the warning would not have had sufficient deterrent effect and that a fine, the exceptionally high amount of which was explained by a number of aggravating circumstances, was justified.

GDPR – One Year On

As 25 May 2018 approached, many organisations faced these new European privacy rules with increasing concern. One of the main reasons for this was undoubtedly the extremely high fines that can be imposed for breaches of the GDPR: the majority of infringements can be punished by a fine of up to EUR 20 million or 4% of total worldwide annual turnover for the previous financial year (the higher of the two).
The level of fine imposed will depend on an assessment by the national data protection authority (DPA) of mitigating or aggravating circumstances listed in the GDPR including the nature, seriousness and duration of the infringement, whether the data involved was sensitive and any previous breaches.
A year on, with the first wave of decisions and fines now issued by a number of DPAs and investigations ongoing in others, it is interesting to examine the initial effects of the GDPR in the EU. Has it managed to enhance protection for people’s privacy? Did the concern expressed at its potential impact turn out to be justified? Are different trends emerging in different EU countries? These and other questions are discussed below.

Several companies involved in Hungarian Data Protection Authority (NAIH) procedures have been fined. The usual amount of the fine is between HUF 500,000 and HUF 1 million, (approximately EUR 1500 and EUR 3000).
In one of its most relevant recent decisions, the NAIH imposed a fine of HUF 1 million on a company with a turnover of HUF 15 million, which it considered a symbolic amount, for not restricting and issuing copies of camera recordings, despite a request from a data subject. The data subject wanted to use the recordings as evidence in legal proceedings, as stated in the request. The company justified its decision on several grounds, including the fact that the data subject did not indicate how deleting the recording would infringe his or her legitimate interest, and in connection with what legal proceedings he or she made the request (although required to do so under Hungarian law).
According to NAIH, the company violated the data subject’s right to restrict data processing. Under Article 18 (1) (c) of the GDPR, it is sufficient for the data subject to argue that restricting processing is necessary for the submission and enforcement of legal claims. There is no need to justify the right and the legitimate interest further than that. The conflicting Hungarian legal provision has been amended by the GDPR implementation law mentioned below.

In addition, the company failed to inform the data subject about the reasons for its decision and the legal remedies available to the data subject.
In imposing the fine, the authority assessed the nature of the infringement as an aggravating circumstance, as it violated the applicant’s rights. The refusal of the request also led to the deletion of the recordings, which cannot be restored. It was a mitigating circumstance that the company committed the infringement for the first time, and also that the conflicting national legal provision. was still in force, which could have misled the company in its decision to deny the data subject’s request.

Hungary has implemented the GDPR with an implementation act came into force on 26 April 2019. The aim of the amendments is the harmonisation of sectoral laws in order to apply the GDPR. The GDPR implementation act amends 86 acts to comply with the GDPR, including the Labour Code. As a result, employees’ documents, the processing of the criminal records and the agreements relating to the use of work-related IT equipment must be reviewed.
Experience has shown that the NAIH is active; several proceedings have been initiated checking the data processing practices of operators and assessing compliance.

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NAIH imposed a fine of one million forints

The Hungarian Data Protection Authority (NAIH) imposed a fine of one million forints on a company with a turnover of 15 million forints, which the Authority considered to be a symbolic amount of money, for not restricting and issuing copies of camera recordings, despite a request from the data subject.

The data subject wanted to use the recordings as evidence in legal proceedings, as he/she also stated in the request. The company justified its decision of not restricting and giving out a copy of the recordings because the data subject did not indicate how deleting of the camera recording would infringe his/her legitimate interest, and in connection with what legal proceedings he/she requests the restriction of processing data of the camera recordings, although it is required to do so according to the Act CXXXIII of 2005 on the private security services and the activity of private detectives (Szvmt).

According to NAIH, the company violated the data subject’s right to restrict data processing. According to Article 18 (1) (c) of the GDPR, it is sufficient for the data subject to argue that the restriction of the processing is necessary for the submission and enforcement of his legal claims. In this regard, Szvmt. is expected to be amended soon.

According to the opinion of NAIH, the company should have complied with the request of the data subject without consideration, since the reason stated by the data subject shall be sufficient to fulfill the request.

In imposing the fine, the Authority assessed the nature of the infringement as an aggravating circumstance, as it violated the applicant’s rights, furthermore, the refusal of the request has led to the deletion of the recordings, which cannot be restored. It was a mitigating circumstance that the company committed the infringement for the first time, and also that the provision referred from the Szvmt. is still in force, which could have misled the company in its decision to deny the data subject’s request.

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Google fined €50 million for infringing the GDPR

On 21 January 2019, the French Data Protection Authority (the ‘CNIL’) fined Google EUR 50 million for infringement of the GDPR. Though this decision only concerned user data, given the unprecedented amount of the fine, it should be considered a warning to all companies to ensure that their personal data management practices, including on HR matters, are GDPR compliant.
The Authority based the investigation on two complaints that arrived immediately after the entry into force of GDPR on May 25, 2018.

The CNIL has examined the complained data processing operations and found two types of infringement.

• Violation of the obligation to have a legal basis for advert personalization processing:

The CNIL observed that the information on the data processing activities provided to users was neither easily accessible nor always clear or comprehensive. Essential information required to sufficiently inform data subjects of storage purposes, periods or categories of personal data used for ads personalization was spread across various documents.

• Violation of the obligation to have a legal basis for advert personalization processing:

Google relied on data subjects’ consent to process data for ad personalization purposes. However, the Authority found that this agreement did not constitute specific, informed and unambiguous consent for the data subjects, because they had to ‘agree’ to Google’s entire privacy policy and terms and conditions in order to access the its products. The CNIL concluded that the data subjects’ consent was not freely given, because they had not been sufficiently informed due to the use of multiple documents and the unclear depiction of the services and websites that would be involved in the ad personalization section.

Further, the CNIL noted that before creating a Google account, each user was asked to agree to the company’s terms of service and privacy policy, which he or she could only amend at a later time by going into ‘more options’ and de-selecting ad personalization.

This is the first time that the CNIL has applied the new sanction limits provided by the GDPR since its entry into force on 25 May 2018. In imposing the fine, the Authority took into account the serious breach of the main principles of the GDPR, according to which the maximum amount to be imposed could be EUR 20 million or 4 % of the company’s global annual turnover. The factors taken into consideration in the Authority’s decision whether to impose a fine or its amount, were the fact that Google’s violations were not one-off incidents or limited in time, but rather continuous breaches of the GDPR, and that their data process cover a wide range of data subjects. Lastly, the CNIL pointed out that as the company’s business model was partly based on ad personalization, Google had all the more reason to ensure that it complied with its GDPR obligations.

The fines serve as a lesson for employers that they need to ensure that the information provided to applicants and employees on the processing of their personal data is clear, unambiguous and easily accessible.