Meta, Facebook’s parent company, has warned that it would pull out of Europe if the authorities continue with the move to stop it from exchanging data from European users with the United States, according to a document the company has filed with the US Securities and Exchange Commission (SEC).
The development is coming on the heels of Meta’s massive shares plunge that wiped off over $250 billion from the social media giant’s market value last week.
Facebook has been bedeviled by tightening private data policies that Europe is heralding, and has increasingly found itself in the grip of unfavorable regulations. This latest faceoff with European regulators may affect the company’s existence in Europe.
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“If a new transatlantic data transfer framework is not adopted and we unable to continue to rely on SCCs (standard contractual clauses) or rely upon other alternative means of data transfers from United States, we will likely be unable to offer a number of our most significant products and services, including Facebook and Instagram, in Europe.
“If we are unable to transfer data between and among countries and regions in which we operate, or if we are restricted from sharing data among our products and services, it could affect our ability to targets,” Meta said in a statement, admitting that any changes would materially and adversely affect our business, financial condition, and results of operations.
The case started several years ago with a complaint from the Austrian privacy activist Maximilian Schrems about Facebook Ireland, the company’s European headquarters. Schrems had complained to the Irish data protection authority about Facebook Ireland’s transfer of personal data to its parent company in the US. He wondered whether they were sufficiently protected in the US.
Meta has weighed pulling out of a country as an option against unfavorable regulatory legislations before now. Last year, the social media behemoth moved to quit its news service in Australia as the government introduced a legislation that will force it to pay publishers for their content. Meta reversed its decision after the Australian government softened the legislation.
Europe has been tightening its antitrust laws to hold the Big Tech accountable for how they use private data of consumers. In 2020, Facebook was told by privacy regulators in Ireland that it could no longer use standard contractual clauses to comply with privacy rules when sending data to the US, the so-called Privacy Shield.
European regulators are trying to set new privacy-focused policies that are different from what is obtainable in the US. The European Court of Justice has said that personal data is less well protected in the US than in Europe. The US and the EU have tried to work out a new policy on the use of private data, but it is yet to be implemented.
Meta, which heavily relies on the processing of user data in order to provide targeted online advertisements, immediately protested the move, saying it will greatly hurt its business.
If Europe proceeds with the rule, it will have a devastating impact on businesses relying on Meta’s social media platforms, Facebook, Instagram and WhatsApp to offer their services.
“A lack of safe, secure and legal international data transfers would damage the economy and hamper the growth of data-driven businesses in the EU, just as we seek a recovery from covid-19,” City AM quoted Nick Clegg, Meta’s VP of Global Affairs and Communication as saying.
“The impact would be felt by businesses large and small, across multiple sectors. While policymakers are working towards a sustainable, long-term solution, we urge regulators to adopt a proportionate and pragmatic approach to minimize disruption to the many thousands of businesses who, like Facebook, have been relying on these mechanisms in good faith to transfer data in a safe and secure way,” he added.
However, Meta is likely going to suffer more as businesses relying on it would eventually switch to alternative social media platforms. The company’s recent shares’ plunge was largely as a result of Apple’s ATT (app tracking transparency) introduced last year. The ATT enables iPhone users to stop Facebook from tracking them across the web to harvest data for targeted ads.
The Irish data regulator is currently investigating the matter while Meta waits for the final decision expected mid-year. But if a “good” solution is not found, Meta, which is currently struggling to stay afloat in the US, will suffer an existential crisis.