Regulatory Compliance with Limited Enforceability: Evidence from Privacy Policies

66 Pages Posted: 9 Nov 2023 Last revised: 8 Mar 2024

See all articles by Bernhard Ganglmair

Bernhard Ganglmair

ZEW – Leibniz Centre for European Economic Research - Junior Research Group Competition and Innovation; Mannheim Centre for Competition and Innovation (MaCCI); University of Mannheim - Department of Economics

Julia Krämer

Erasmus University Rotterdam

Jacopo Gambato

ZEW – Leibniz Centre for European Economic Research; University of Mannheim

Multiple version iconThere are 2 versions of this paper

Date Written: March 6, 2024

Abstract

The EU General Data Protection Regulation (GDPR) of 2018 introduced stringent transparency rules compelling firms to disclose, in accessible language, details of their data collection, processing, and use. The specifics of the disclosure requirement are objective, and its compliance is easily verifiable; readability, however, is subjective and difficult to enforce. We use a simple inspection model to show how this asymmetric enforceability of regulatory rules and the corresponding firm compliance are linked. We then examine this link empirically using a large sample of privacy policies from German firms. We use text-as-data techniques to construct measures of disclosure and readability and show that firms increased the disclosure volume, but the readability of their privacy policies did not improve. Larger firms in concentrated industries demonstrated a stronger response in readability compliance, potentially due to heightened regulatory scrutiny. Moreover, data protection authorities with larger budgets induce better readability compliance without effects on disclosure.

Keywords: data protection, disclosure, GDPR, privacy policies, readability, regulation, text-as-data, topic models

JEL Classification: C81, D23, K12, K20, L51, M15

Suggested Citation

Ganglmair, Bernhard and Krämer, Julia and Gambato, Jacopo, Regulatory Compliance with Limited Enforceability: Evidence from Privacy Policies (March 6, 2024). Available at SSRN: https://ssrn.com/abstract=4600876 or http://dx.doi.org/10.2139/ssrn.4600876

Bernhard Ganglmair (Contact Author)

ZEW – Leibniz Centre for European Economic Research - Junior Research Group Competition and Innovation ( email )

L7,1
Mannheim, 68161
Germany

Mannheim Centre for Competition and Innovation (MaCCI) ( email )

L 7, 1
Mannheim, 68131
Germany

University of Mannheim - Department of Economics ( email )

D-68131 Mannheim
Germany

Julia Krämer

Erasmus University Rotterdam ( email )

3000 DR Rotterdam
Netherlands

Jacopo Gambato

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

University of Mannheim

Universitaetsbibliothek Mannheim
Zeitschriftenabteilung
Mannheim, 68131
Germany

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