The Cookie Conundrum: A Comprehensive Guide for E-commerce Directors

You’re no stranger to the digital landscape. You understand the importance of data and how it drives your business. But with the rise of data privacy laws, navigating the world of cookies has become a complex task. This guide aims to demystify cookie laws and help you understand how to comply with them.

What’s a Cookie?

Cookies are small data files that websites place into the memories of devices that access the site. They allow websites to remember the device and gather information about its activities. You can divide cookies into three main categories:

• Session vs. Persistent: Session cookies delete themselves when the device stops accessing the website, while persistent cookies remain until the next visit and beyond.
• Necessary vs. Elective: Necessary cookies are essential for the site to operate correctly, while elective cookies perform tasks like allowing users to shape their experience or enabling marketers to track their activity.
• First-party vs. Third-party: First-party cookies are dropped by your organization, while third-party cookies are dropped on behalf of a marketing partner or other outside organization.

Understanding these distinctions is crucial when it comes to complying with cookie laws. For instance, the classification of a cookie can have significant implications for compliance. Whether it is a first-party, necessary, session cookie or a third-party, elective, persistent cookie can greatly affect the requirements.

The EU Cookie Law (ePrivacy Directive)

In 2011, the EU passed the ePrivacy Directive, often called the EU Cookie Law, which regulated the placement of digital files on digital devices. It was the first to address the data privacy implications of cookies.

In 2018, the European Union’s General Data Protection Regulation (GDPR) went into effect, establishing core principles to govern the collection of personal information. Along with these guidelines, the regulation includes strict penalties for violations of those principles, reflecting a strong commitment to data protection. The GDPR classifies any data created by an identifiable person as personal data and requires consent before collection of that data.

The Global Impact of Cookie Laws

The GDPR and the EU Cookie Law have influenced data privacy legislation around the globe. Countries wanting to continue doing business with the European Union needed to meet its data privacy standards. This led to the rise of similar laws in various countries, including:

• California Privacy Rights Act (CPRA): An update to the California Consumer Privacy Act (CCPA) that came into effect on January 1, 2023. The CPRA classifies online activity data as personal data and tightly regulates its use.
• Virginia Consumer Data Protection Act (VCDPA): The VCDPA allows consumers to opt out of targeted advertising, profiling, and the sale of personal data.
• Connecticut Data Privacy Act (CTDPA): The CTDPA allows consumers to opt out of targeted advertising, the sale of personal data, and profiling that leads to significant effects.
• U.K. Data Protection Act: The UKDPA, enforced by the UK’s Information Commissioner’s Office, is virtually the same as the GDPR.
• Brazil’s LGPD: People often refer to the LGPD as the Brazilian GDPR, and it conveys largely the same rights regarding personal data.
• South Korea’s PIPA: South Korea’s Personal Information Protection Act (PIPA) imposes significant penalties for the mishandling of personal data.
• China’s PIPL: The Personal Information Protection Law (PIPL) passed by China in 2020 is among the most stringent privacy laws in the world.
• Japan’s APPI: People believe that Japan’s Act on the Protection of Personal Information (APPI) covers data collected by cookies.

Complying with Cookie Laws

Compliance with cookie laws is no longer optional for businesses with a significant online presence. Implementing cookie management and consent management systems has become a best practice. These systems operate via “cookie banners” or “cookie notices,” which alert visitors to the fact that cookies will be placed as soon as they land on the site.

There are ready-made cookie disclosures and management systems available that comply with various international and state laws. These systems allow website operators to choose from several cookie notification options, including opt-in, opt-out, and implied consent disclosures.

Penalties for Noncompliance

Not following cookie laws can result in big fines and punishments. For example, under the GDPR, officials can enforce rules by banning the collection of data from people in the EU, either temporarily or permanently. They can also order the deletion of data collected without permission, and they can fine the responsible party up to 4% of the global income from the last financial year, or 20 million euros, whichever is more.