Evan Schuman's StorefrontBacktalk

For U.S. retailers, the situation is even stranger. In practical terms, any European customers will have to be notified immediately if there’s any breach that might affect them, even if the group is tiny. That notification won’t remain quiet for long—news reports will bounce the word back to the U.S. Then retailers will have a much larger task notifying U.S. customers of the breach.

Never mind what U.S. data-breach standards are—whichever country has the tightest standards will rule the situation. (That has actually been formalized in India’s new data-breach rules, but it’s a de facto result of how the European law will work.)

In fact, the smaller a U.S. retailer’s footprint in Europe, the more troublesome a problem this is likely to be. It’s bad enough for a retailer like Gap, which now uses an outside vendor called FiftyOne to do order-taking and shipping in dozens of countries. That arm’s length transaction almost certainly won’t be enough to shield Gap from the new EU requirements, but at least Gap will know it has customers in Europe.

Although companies like FiftyOne handle local currencies, tariffs and logistics, they’re not in a position to be in the center of a data breach for their retailer clients. Gap will still have to stay on top of European law and do the notifications.

But consider the situation of a retailer that has no official E-Commerce presence in the Euro zone. Customers can see the Web site, but no orders are officially accepted there. What happens when a third-party parcel-forwarding service such as Bongo or BayRu takes orders from Euro-zone customers and gives the retailer a U.S. address? The retailer doesn’t even know it has European customers.

If there’s a breach, and European customer payment-card data is stolen, the retailer may manage to dodge legal penalties for not immediately notifying European customers—after all, the retailer really didn’t know those customers were in Europe. But that will likely happen only after bureaucratic hassles and bad publicity.

(There’s an even worse scenario: one where the first indication a retailer gets of a data breach is when a European customer’s stolen card data leads back to the retailer that didn’t know it had any European customers. You can’t get farther behind the curve than that.)

Short of lobbying for international agreements that provide a little protection (or a lot more consistency), U.S. retailers may be stuck. In this game, whoever has the toughest rules wins.