Clubhouse Already In Hot Water with Regulators
A few months ago, Clubhouse burst onto the social media
scene as one of the fastest growing new platforms. However, it didn’t take long
for regulators to take notice. The French data privacy regulator has already
started an investigation into how Clubhouse is handling user data. European countries
are known for their much stricter data privacy laws relative to the US. Clubhouse’s
specific offense relates to their secret downloading of all of a user’s
contacts when users sign up.
General Data Protection Regulation, or GDPR, has been used
to restrict the dissemination of user information among the public and for advertisers.
Nothing strikes more fear into the hearts of major tech companies who traffic
in enormous amounts of personal data than the prospect of GDPR becoming a framework
for regulation in other countries across the globe. The flow of data into and
out of these platforms is the lifeblood of their business, and any restrictive
regulation would be very, very bad for that business.
Failing to comply with the regulations could cause companies
to be shut out of entire countries or regions. Given that their valuations are
often based on high future growth, this could be devastating to their ability
to borrow money or issue equity to keep the business afloat. Clubhouse immediately
issued a statement that they are happy to be transparent and work with
regulators, a common tactic from platforms. Try as they may to avoid
regulation, it seems almost certain that, given the high profile societal
problems blamed on the platforms, further regulation in the US and elsewhere is
inevitable. The companies and their investors should take notice.
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