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Effective Regulation and Firm Compliance: The Case of German Privacy Policies

Author

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  • Jacopo Gambato
  • Bernhard Ganglmair
  • Julia Krämer

Abstract

This paper explores the interaction between the enforcement of and compliance with difficult-to-enforce rules in the context of data regulation. We focus on the effect of the introduction of the GDPR and its transparency principle on the readability of privacy policies for a large sample of German firms. Germany has a system of statelevel data protection authorities. These data regulators enforce the same rules but face diverse funding situations, allowing for an ideal setting to study the role of a regulator’s capacity in firms’ compliance decisions. We find that while, on average, the GDPR lead to less readable policies, firms active in industries that have in the past received more regulatory scrutiny and those active in jurisdictions of better-funded data regulators exhibit a stronger compliance with the GDPR’s readability requirement. These results exemplify a more general interaction between regulators’ enforcement activity and firms’ regulatory compliance.

Suggested Citation

  • Jacopo Gambato & Bernhard Ganglmair & Julia Krämer, 2025. "Effective Regulation and Firm Compliance: The Case of German Privacy Policies," CRC TR 224 Discussion Paper Series crctr224_2025_659, University of Bonn and University of Mannheim, Germany.
  • Handle: RePEc:bon:boncrc:crctr224_2025_659
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp659
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    More about this item

    Keywords

    data protection; GDPR; privacy policies; readability; regulation; text-as-data;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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