Argentina is about to give final approval to the toughest data protection law in Latin America, but local direct marketers hope to soften some of its most damaging provisions during the six months it will take to write regulations for administering the bill.
President Fernando de la Rua was slated to sign the bill on his return from Madrid, but it can become law without his signature. He may also use a line-item veto.
But the Argentina DMA, which has led a months-long, vigorous lobbying campaign to make the bill livable for the industry, doubts that any last-minute rescue operation is feasible.
Instead, it is pinning its hopes on the process of writing regulations, which the law stipulates must take six months. A special executive branch group is being designated to supervise implementation of the law, which is patterned after the Italian and Spanish model of the EU's data protection directive.
The Argentine law's two most damaging provisions for American direct marketers are opt-in for all DM activities and a ban on data transfer to countries without adequate protection of private data.
“There is a phrase in the law that says you must notify every person on a list and get his agreement before you can rent or sell it,” said Mary Teahan, an American who is president of the Argentine DMA.
“Imagine having to notify everybody every time. It would create excess costs so large that they would effectively prohibit most direct marketing activities,” she said.
But she said the regulatory process is likely to modify that restriction. Instead of notifying the person, he will be told upfront that his name will be sold and that he can call to object.
If that change is achieved, it would be dramatic. The text, said Roxanne Penagos, the Reader's Digest counsel for Latin America based in Mexico City, is “express consent and it has to be expressed in writing or in an equivalent — fax or e-mail — but it does not say anything about phones.
“If you can't give consent on the phone,” she said, “the situation would become impossible and make business completely unfeasible.”
The law, Teahan and Penagos agreed, is ambiguous as written and is open to conflicting interpretations. Indeed, some paragraphs are contradictory — one reason why writing new definitions is so important.
Data transfer is an example. One draft of the law said data could only be sent to countries that had an “equivalent” law to Argentina's on the books, a much tougher provision than the EU's, which asks for “adequate” protection and allows company-to-company agreements.
But the final draft changed “equivalent” to adequate and seems to allow data transfer within companies.
Charles Prescott, the US DMA's international vice president, noted that Argentina, unlike Italy, recognizes no higher authority in implementing the law. The EU has already told Italy that its law is unacceptable and must be changed. Argentina has no international body to answer to.
The US Council for International Business sent a letter to the American ambassador in Argentina and to other US officials, expressing concern about the law and asking the US government to intervene.
The council's David Ferris said the Argentine law could be worse than the EU's directive, since as it is written, Argentina would have to conclude treaties with third countries to assure adequacy. The EU negotiated safe harbor provisions with the US to allow data transfer.
Ferris also noted that the law could not only hurt US interest, but also damage the Argentine economy, “which already is not doing that great.” Teahan shares his concerns.
She believes that divergent interpretations of the law come from sloppy drafting and can be fixed through the regulatory process. But she worries that US DM companies will stop investing in Argentina.
“Lawyers will read the law — as they are already doing — and tell management that's what it says, but not how the law will be interpreted, and thus scare off investors,” she said.
