GDPR fines: ensuring data compliance and mitigating financial risks

The General Data Protection Regulation (GDPR) protects the online privacy of European Union (EU) citizens. Companies operating within the European Economic Area (EEA) must follow EU data privacy rules. Violations result in reputational harm and also carry heavy fines.

Anyone responsible for data protection and compliance needs to know about GDPR fines. This article will explain how the GDPR system works and how large compliance fines can be. We will also offer some suggestions about how to avoid damaging regulatory violations.

Key takeaways

GDPR fines impose financial penalties on companies to encourage compliance.
There are two tiers of fines under GDPR. Fines are higher for large companies, who could pay as much as €20 million or 4% of the firm's revenue. However, even smaller companies could pay €10 million or 2% of annual revenues.
Compliance violations breach specific GDPR articles. Articles include sections on data controllers and processing, obtaining consent, respecting subjects' rights, and transferring data securely.
When levying fines, regulators consider the impact of the violation on customer privacy. They determine whether violations are intentional. Regulators consider the company's compliance history. And they factor in aggravating or mitigating factors.
Data controller responsibilities include ensuring that third parties follow GDPR rules. Companies that collect data are responsible for violations within the supply chain. This applies unless they can prove they had no responsibility for the violation.

Regulatory fines enforce compliance with legislative frameworks. Fines raise the cost of non-compliance. Companies have no choice. They must invest in security controls, privacy policies, and compliance departments.

GDPR fines cover companies collecting data within the EU. They seek to protect individual privacy and data security. Regulators take violations of GDPR rules extremely seriously. It is impossible to do business in the EU without a robust compliance strategy.

Fines have two tiers. Each tier has a maximum threshold. Regulators calculate fines as a percentage of annual global revenues. Or they can impose a single block fine.

As a result of this system, EU data regulation penalties can be extremely severe. For example, Irish regulators fined social media company Meta $1.3 billion in 2023. And Amazon received a $746 million fine in 2021.

Under GDPR, regulators assess fines using a two-tier system. Tiers relate to the size of the company and the seriousness of the violation.

At the lower level, fines can reach €10 million or 2 percent of annual revenues, whichever is greater.
At the higher level, the maximum GDPR fine per violation is €20 million or 4% of revenues.

Regulators can also issue GDPR warnings to non-compliant companies. Warnings provide a window for organizations to make their policies and systems compliant. But they lead to fines if companies fail to act.

Compliance and Data Protection Officers (DPOs) must understand what counts as severe infringements. If not, companies will struggle to identify compliance risks. And this will increase the risk of incurring damaging consequences.

Companies can often handle fines calculated as a percentage of turnover. Dealing with reputational damage and the loss of customer trust is harder. Businesses that repeatedly compromise customer privacy or put personal data at risk will suffer in the European market.

Less severe infringements (Tier 2)

Lower-level GDPR infringements violate the following clauses:

Children's consent (article 8)

Not requesting children's consent in relation to information society services.
Not taking adequate steps to ensure legitimate parental consent where applicable.

General data processing (articles 11 and 25-39)

Data controllers or processors must meet their legal obligations. Violations in this section include:

Failure to choose a data representative within an EU jurisdiction.
Failure to apply security controls
Not informing users about the legal basis for data collection.
Failure to inform users when companies make user data non-identifiable.
Failure to document data storage and transfer practices.
Violations of the 72-hour breach notification rule. Failure to provide accurate information about breaches to individuals.
Data processing by third parties without the permission of the data controller.
Failure to carry out a data protection impact assessment.
Failure to name a Data Protection Officer where this is legally required.

Monitoring bodies (article 41)

Monitoring bodies must be transparent and competent when handling GDPR complaints.

Certification and auditing bodies (articles 42 and 43)

Certification bodies and accredited auditors must assess companies objectively and without bias.

More serious infringements (Tier 1)

Upper-tier violations breach the privacy and data control rules at the heart of GDPR. This makes protecting and controlling personal data core elements of a legal compliance strategy.

Severe GDPR infringements include:

Lawful data practices (articles 5, 6 and 9)

Not satisfying one or more of the 6 lawful reasons for data collection.
Collecting prohibited data such as racial origin, political beliefs, or biometric information.

User consent (article 7)

Not requesting consent to collect, process, and share information.
Failing to document consent requests.

Respecting user rights (articles 12-22)

Not informing users about their privacy rights or what they do with personal data. Organizations fail to comply with requests from users for copies of their personal data.
Not correcting personal data when requested.
Not erasing data when users make a legitimate request.
Not transferring data when requested.

Transferring data to third-party countries (Articles 44-49)

Transferring data to partners in third-party countries without EU approval.
Carrying out insecure international data transfers.

Violating Chapter IX national laws

Under Chapter IX, EU member states can pass extra data protection laws provided they do not conflict with GDPR. Violating these laws counts as a tier 1 violation.

Failure to comply with regulatory requests

Companies must comply with the requests from supervisory authorities. This includes requests relating to less-severe tier 2 violations.

General Data Protection Regulation sanctions are based on many criteria. DPOs and compliance teams must be aware of these factors when guarding user privacy.

When levying fines, EU regulators consider:

The severity of the violation. Regulators assess what happened and how many people were affected by the violation. They assess harms or privacy violations arising from GDPR breaches and factor in the length of time it took to resolve the breach.
Intention. Deliberate breaches attract higher fines than accidental violations. However, negligence can still attract sizeable fines.
Mitigation measures. A GDPR fine will be higher if an organization has failed to fix known breaches. Companies must show they have supported individuals affected by the violation. They must also provide redress where appropriate.
Pre-violation precautions. Companies taking precautionary measures before a violation will receive lower fines. Precautions can be organizational, such as policies and procedures. Or they can involve technical controls.
Compliance history. Companies with a history of non-compliance attract higher fines. A history of non-cooperation with supervisory bodies also leads to higher fines.
Type of data. Some data types are more sensitive than others. For instance, a data breach that failed to protect health data would attract a higher GDPR fine.
Certification. Companies that follow recognized privacy standards or achieve industry certifications may receive lower fines.
Notification. Fines rise if a company fails to notify regulators of affected individuals within the GDPR timescale.
Aggravating factors. If an organization profits by violating GDPR, this may count against it.
Mitigating factors. Regulators may reduce fines if no self-interest is involved. Organizations may also prove they were not responsible for the violation.

Understanding the data controller's responsibility

Data controllers play a critical role in the GDPR system. They handle data processing, decide how to use customer data, how the organization stores data, and how individuals control their data.

In most cases, the controller is the company that interacts with an individual. This can vary. For example, a corporation may choose a subsidiary as the data controller within the EEA. The identity of the controller is always stated in the privacy notice.

Data controllers are responsible for ensuring that third-party data processors are GDPR-compliant. Third parties must meet the core requirements of Article 5:

Lawful data processing
Minimal data collection
Correction of inaccurate personal data
Data retention for the shortest possible period
Ensuring data integrity and security

Data controllers must vet all third-party processors to ensure they follow these principles. If third parties violate GDPR rules, controllers are usually liable. Weak vetting eventually leads to significant fines.

GDPR came into effect in 2018. Six years later, national regulators had issued 2000+ fines across the EU. The total amount levied had reached €4.5 billion, while the average GDPR infringement fine was €2,290.

As of 2024, very few companies had suffered bankruptcy resulting from a GDPR fine. But thousands of businesses have lost customer trust following regulatory action. Fines have also decreased the market value of companies. Investors tend to avoid companies with poor security and privacy measures.

Here are ten of the largest fines to give you an idea of what is at stake:

Meta (2023) €1.2 billion: For unsafe transfer of user data from the EU to the United States.
Amazon (2021) €746 million: For collecting data via cookies without adequate consent.
Meta (2022) €405 million: For illegitimate processing of children's data.
Meta (2023) €390 million: For using contractual consent forms instead of GDPR-compliant consent forms.
TikTok (2023) €345 million: Due to poor age verification, putting young users at risk.
Meta (2022) €265 million: Due to poor data security, enabling access for hackers.
WhatsApp (2021) €225 million: For not making data collection transparent to users.
Google (2021) €90 million: For making it harder to opt out of YouTube cookies than to enable them.
Enel Energia (2024) €79 million: For not ensuring data security.
Facebook Ireland (2023) €60 million: For not making cookie opt-outs as easy as opting in.

As you can see from this list, there are many grounds for fines for non-compliant organizations. Companies need a broad compliance focus, including consent, data security, child protection, and many other factors.

Mitigating financial risks through compliance

Compliance teams must proactively implement strategies to meet EU regulations. Elements of a robust GDPR strategy include:

1. Data security

Under GDPR, companies must use technical and organizational measures to protect user data. There is no single recipe for security controls. Companies should use "appropriate" techniques that fit their data environment.

2. Risk management

Companies need to identify and manage critical compliance risks. Risk assessments should consider potential violations. Compliance teams assess the severity and probability of each risk. And they should use these assessments to put in place mitigation measures.

Risk management plans should cover the core GDPR risk areas. This will ensure companies are well-protected against fines.

3. Contractual agreements

Companies must integrate compliance into their contracting practices. Remember that data controllers are responsible for third parties GDPR violations.

Contracts should require that partners follow GDPR privacy rules. Compliance teams should regularly check third-party performance to ensure they follow these rules.

Managing GDPR risks is challenging. But following these best practices will make compliance easier:

Provide comprehensive privacy training for employees. Refresh employee knowledge regularly.
Schedule regular privacy audits. Check what personal data you collect, how you use it, and how data is stored.
Cut the amount of data you collect and store.
Centralize risk and policy management. Give your Data Protection Officer the tools needed to manage GDPR risks.
Prepare a GDPR incident plan. Report incidents according to EU rules. Train stakeholders to execute response plans smoothly.
Update your security controls. Invest in encryption, firewalls, and authentication tools. Keep personal data locked away and safe.

Under Article 82 of GDPR, individuals can claim compensation for violations of their rights. They do so via the courts in their home jurisdiction. National courts decide how much compensation to award.

Compensation applies if GDPR violations cause material or non-material damage to the individual. For example, disclosure of personal data could lead to mental distress. In this case, individuals would be eligible for compensation.

Courts must decide whether compensation claims are serious enough to merit penalties. Since 2018 successful claims based on non-material distress have been rare. Violating GDPR does not automatically trigger compensation. But it is a possibility.

To avoid future compensation claims, companies should protect user privacy. They should avoid breaching data processing rules. They must also be aware of user rights under GDPR.

The General Data Protection Regulation protects digital privacy within the EEA and EU. Regulators calculate GDPR penalties as a percentage of global turnover. This allows national regulators to impose large fines on companies violating GDPR rules.

In some cases, fines have exceeded $1 billion. Any company that interacts with European customers must be compliant to avoid severe penalties.

Businesses can avoid fines by identifying their compliance risks. DPOs should create plans to avoid GDPR breaches. Data protection controls should secure personal data. And companies should audit risk mitigation strategies to ensure continuing compliance.

With planning, organizations can reduce their financial liabilities for GDPR violations. However, doing so requires a proactive and systematic approach.

Disclaimer: This article is for informational purposes only and not legal advice. Use it at your own risk and consider consulting a licensed professional for legal matters. Content may not be up-to-date or applicable to your jurisdiction and is subject to change without notice.