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14 Aug 2020

Econ Digest

The reasons beyond data security that caused the US to ban foreign social media companies


         The crisis of the COVID-19 pandemic has continuously driven the growth of the number of users of social media applications, which are becoming the main channel for interaction between consumers while maintaining social distancing, and which result in a large amount of consumer information rapidly flowing onto the Internet. There have been instances where consumer information has been used without permission to seek business opportunities or where lawsuits were able to be filed due to nuisance caused, but since the technology has continuously evolved along with the expansion of social media businesses to a wide range of countries, it as provided an opportunity for such business operators to easily encroach on behavioral data and personal information. For this reason, data security, consumer data protection issues (data security), and confidence levels of consumer data protection laws in each country have thus become the main factor affecting the growth of the social media industry.

        Currently, there are cases where foreign social media applications are banned by the US with an order issued from the President to prohibit American companies from doing business with those social media companies. KResearch views that the primary cause of banning foreign social media applications is likely primarily due to the concern of data security stemming from the different processes that give access to consumer data. In the US, the issue of national security must be addressed if the government wants to access consumer data, and the government has to submit a case to the court for approval. This has made the US more familiar with the due diligence process that counterbalances the government’s power to access consumer data. Regarding the country that has been reported to be banned from providing social media services in the US, it is deemed that the US considers the role of public and private sectors of the country to be unclear, since if the government wants to access consumer information from a database of social media operators, such operators are likely to cooperate without inspection or the approval of other administrative sectors. It reflects that the US may be concerned that such government has absolute power over the private sector. Therefore, although countries providing social media services are equipped with standardized consumer data protection laws and recognized consumer data retention systems, due to the ambiguity issue between public and private roles, the US is uncertain about social media applications originating from that country. Different perspectives and acceptance levels of the process of accessing consumer data has caused the US to be uncertain and led to the introduction of preventive measures through the blocking of social media services. The US has also requested foreign social media companies to accept the proposal of big US tech companies to purchase the relevant social media platforms in order to operate them independently in the US.

         However, the implementation of such guidelines in the US will affect foreign social media companies, regardless of whether they accept the proposal or not. This is because if such a proposal is accepted, the US will meet the needs of information leakage prevention during the migration of the US consumer database in that country back to the US, and it will also strengthen the business potential of US operators by gaining more share in the social media market. In the meantime, if foreign social media operators reject that offer, the US is likely to impede their services, which will reduce the number of market participants and benefit major US social media operators. For this reason, KResearch views that data security in respect of the geopolitical issues resulting from the different rules surrounding consumer data access of each country may become a major factor for international social media operators in planning their expansion into other countries.     

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Econ Digest