Days after its stock value took a tumble, Meta disclosed another somber news to investors. The Big Tech giant seems to be in the early stages of a downward spiral stirred by snowballing concerns and increased scrutiny over data privacy, dwindling revenue, a decline in user growth, and more. Meta’s Facebook and Instagram may now have to quit the EU market.
Meta may have to shut some of its social media services in the European Union soon, the company warned in its annual Form 10-K filing to the Securities and Exchange Commission (SEC). The company said it might need to discontinue Facebook and Instagram in the continent as the EU tightens its grip around data privacy regulations.
EU regulators are currently drafting new legislation that can change the way data is shared between European and North American servers. The crux of the issue is that the Court of Justice of the European Union (ECJ) declaredOpens a new window data isn’t safe once it goes out of the EU to the U.S., and thus nullified the EU-U.S. Privacy Shield in July 2020.
This resulted from a lawsuit filed by Max Schrems, an Austrian data privacy activist, in the wake of the telling disclosure by NSA employee-turned-whistleblower Edward Snowden. Lack of appropriate safeguards to preclude U.S.-based organizations like the NSA, CIA, etc., to surveil on Facebook and other platforms’ users also prompted the ECJ to develop stricter data transfer regulations.
Since then, a new regulation hasn’t come to fruition, but data transfers between the U.S. and EU were still valid, thanks to Standard Contractual ClausesOpens a new window (SCCs). However, this may not last long. Negotiations for a new pact/framework are underway but going by recent proceedings, it may not materialize.
“If a new transatlantic data transfer framework is not adopted and we are unable to continue to rely on SCCs or rely upon other alternative means of data transfers from Europe to the United States, we will likely be unable to offer a number of our most significant products and services, including Facebook and Instagram, in Europe,†Meta said.
This could prove to be bad news, not only for Meta but also for other U.S. companies. But for now, Meta is the only large company that has made its position clear. And it seems EU regulators aren’t buying Meta’s threat and calling out its bluff.
“Leaving the EU would be their loss,†said Axel Voss, a Member of European Parliament from Germany.Â
I have always called for an alternative to the EU US #privacyshieldOpens a new window to find a balanced agreement on data exchange + always called for #GDPROpens a new window flexibility. However, #METAOpens a new window cannot just blackmail the EU into giving up its data protection standards, leaving the EU would be their loss.
— Axel Voss MdEP (@AxelVossMdEP) February 7, 2022Opens a new window
Germany’s minister of economics Robert Habeck went a step further, indicating that European users may not miss Meta’s services much. “After being hacked I’ve lived without Facebook and Twitter for four years and life has been fantastic,†Habeck toldOpens a new window the press.
The French finance minister Bruno Le Maire, who accompanied Habeck at the press meet, added, “I can confirm that life is very good without Facebook and that we would live very well without Facebook. Digital giants must understand that the European continent will resist and affirm its sovereignty.â€
So why is data sharing so crucial to Meta? It enables the company to refine ad targeting and enhance operations. Some would argue it forms the basis of Facebook’s business model that relies on surveillance capitalism and monetization of personal data.
Nick Clegg, Meta’s vice president of global affairs and communications, told CityAMOpens a new window , “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.â€
Facebook added, “We have absolutely no desire and no plans to withdraw from Europe, but the simple reality is that Meta, and many other businesses, organizations and services, rely on data transfers between the EU and the U.S. in order to operate global services.â€
In August 2020, a month after ECJ’s ruling, the Irish Data Protection Commission ordered Facebook, as it was then known, to suspend transfers of EU citizens’ data to the U.S. The regulatory body concluded that Meta Ireland’s use of SCC regarding European user data does not comply with GDPR.
IDPC even fined the instant messenger WhatsApp, also owned by Meta, €225 millionOpens a new window (~264.85 million) over revelations that WhatsApp shared user data internally with Facebook, let alone external governmental and other agencies.
Meta’s social media services are used by 427 million EuropeansOpens a new window (Facebook) and over approximately 26 millionOpens a new window (Instagram), which represent ~15% and ~2.6% of their total worldwide monthly average users (MAUs), respectively.
The departure of Facebook and Instagram, two of the largest social networks, may set a precedent for all future privacy regulations. It may also spur a debate around GDPR-esque privacy laws at the federal level, complementing existing state-level privacy laws such as the California Consumer Privacy Act (CCPA).
The Electronic Privacy Information Center (EPIC) and 23 other groups wrote to President Joe Biden in June 2021, requesting that laws in the U.S. reform existing practices concerning government surveillance and provide comprehensive privacy protections for users. And as things stand, this seems like the only solution to the problem at hand.
“There have been calls for the United States to strengthen and modernize its privacy laws since long before the European Union’s General Data Protection Regulation came into effect in 2018. The modern concept of the right to privacy was invented in the United States – but now we lag behind many other nations on privacy protections,†the letterOpens a new window read.
“It is long past time for the United States to update its privacy laws and regain its position as a leader on these issues, which have broad bipartisan support. The ongoing failure to modernize our privacy law imposes enormous costs on individuals, communities, and American businesses alike.â€
Facebook and Instagram moving out of the EU may also present an opportunity for new players to fill the void and emerge as competitors to the platform in the coming years.
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