Data trading can become lucrative for consumers

TikTok is being called to court by two organizations that want to distribute approximately 1.5 billion euros in compensation among the parents of young TikTok users in the Netherlands. What's behind the mass claims?

This article was published on 24th June 2021 on NRC in the Netherlands. Written by Peter Olsthoorn. 

TikTok must pay Dutch children compensation for the unlawful collection and trading of their data, according to the Consumers' Association and the Take Back Your Privacy foundation. The two organizations have sent the company behind the popular app a claim of 1.5 billion euros for violating the privacy of children, they announced on Thursday. If TikTok does not comply with the demand, the two organizations will go to court.

The Consumers' Association calls on parents of children who have used TikTok, or predecessor musical.ly, to join the claim. Invoking the Collective Settlement of Mass Damage Act, victims can collectively claim compensation in this way.

1. 1. Wasn't there such a mass claim recently?

At the beginning of June 2021, the Somi foundation in Badhoevedorp already started a collective action at the Amsterdam court against the operator of TikTok, the company ByteDance. Somi is an initiative of entrepreneur Hans Franke, who is also a board member and finances the lawsuit with a loan. Somi pays Douwe Linders, an experienced privacy lawyer from the Solv agency.

Damiën Berkhout of Scott+Scott, an international law firm specialized in claims cases, is the lawyer in the case of the Consumers' Association and Take Back Your Privacy. Like his colleague Linders, he will soon be able to boast of a ruling from the Dutch Data Protection Authority. He started an investigation into TikTok in May 2020, recently completed this, but the outcome is not yet public.

1. 2. What exactly are these organizations accusing TikTok of?
   

Both sides accuse TikTok of a large-scale violation of the GDPR data protection law. Somi also believes that TikTok violates the rules of the European Audiovisual Media Services Directive (AVMS); in particular the rules for the protection of children.

The Consumers' Association and Take Back Your Privacy state that in recent years TikTok unlawfully processed the personal data of 1.2 to 1.6 million Dutch children for targeted advertising sales. The GDPR states, among other things, that data from children under the age of 16 may only be processed with the explicit consent of the parents. The organizations demand that TikTok stop this data processing, delete all processed data of Dutch children, and pay compensation of 1.5 billion euros.

Somi's 140-page summons contains many examples of alleged violations of the law by the "profiles and advertising machine" TikTok, as well as the failure to ask for parental consent for the processing of personal data that applies to children in the Netherlands. Somi also says that TikTok processes far too much data from children, without specifying it for purpose or properly securing it.

There are also allegations of violation of the European video law. Somi and her lawyer speak of inflicting "mental harm", "addiction-provoking effect of the profiling and algorithms" and of the "poor self-image" and the "unrealistic ideals of beauty" that TikTok promotes. The death of an Italian child in one of the 'challenges' is thrown at TikTok's feet.

1. 3. Is this an easy way to make money from concerned parents?
   

Data protection was already a revenue model for Big Tech and law firms that assist companies, but it can also become for private individuals. The Consumers' Association hopes to collect about 1,000 euros per child to pay out to parents. Somi mentions a total amount of 1.4 billion euros, to be collected for "more than 1 million minors".

Both claims have a commercial basis with compensation for high legal costs. The Bond and Take Back Your Privacy are supported by BPGL Funding I Limited which has only recently been registered in Jersey tax haven. This risk fund is entitled to 22 percent of the proceeds plus a maximum of 3 percent of the proceeds as cost compensation.

Somi is still looking for an external financier. If the judge does not order Tiktok to pay costs, the foundation will ask the judge to withhold a maximum of 20 percent of the compensation. Parents can participate in the claim against TikTok at Somi via TikTokclaim.org, against payment of 17.50 euros, which they get back when they win. Registration for the claim of the Consumers' Association is free. Somi says that 13,000 Dutch and 7,000 Belgian parents have paid.

Since 1 January 2020, mass claims in the Netherlands have become simpler after the introduction of the Collective Settlement Mass Damage Act (Wamca). The GDPR also raises the possibility of mass claims for alleged data protection violations.

1. 4. Do the claims stand a chance?
   

After submitting the first claim under the Wamca, in this case from Somi, other parties can file the same claim for another three months. The court then determines which of the claimants may become the 'exclusive representative'.

Should the Consumers' Association still go to court, the organization has the best chance of becoming a preferred party, given the large permanent following. The union can opt for an independent path or cooperate with Somi who already has a summons.

Both parties hope for a settlement with TikTok whereby the data processing of children will cease and something of an amount will become available for costs incurred.

There are claims within Europe, especially in the Netherlands and England (also against TikTok), but there are no results yet. For example, the Consumers' Association has a claim against Facebook with the Data Privacy Foundation (DPS), which is supported by the American law firm Lieff Cabraser Heimann & Bernstein, which claims 18 percent of any proceeds. The large case against cookie placement by Oracle and Salesforce in the Netherlands and England by The Privacy Collective Foundation with a claim of ten billion euros also has an investor who sees bread in a favorable outcome: Innsworth, part of the American hedge fund Elliott.

In the United States, mass claims have been possible for much longer. In late February 2021, a federal judge recognized a $650 million mass claim to be divided among 1.6 million Facebook users in the state of Illinois. Anyone who registered on time will receive more than $300.

Click here for the original article on NRC.nl (in Dutch)