Meta-owned Facebook and Instagram may not be around in the European Union for much longer, according to the parent company’s annual filing with the US Securities and Exchange Commission (SEC). In its 10-K report for the fiscal year ended 31st December 2021, Meta states that both social media products might be pulled from Europe if the EU and the US cannot come to a reasonable agreement over a new data transfer framework.
Why Is Facebook Agitated?
Without a data transfer agreement which will enable Meta to optimally gather and process user information, it cannot serve targeted ads. It will obviously damage its ability to turn a profit. This is not hard to imagine since we’re already witnessing the fallout of Apple’s privacy changes to iOS – Facebook, Snapchat and Twitter are all feeling the brunt of it as evidenced by their revenue reports. The problem is that such changes harm small and medium businesses advertising on these platforms too.
European regulations prevent companies like Meta and Google from gathering and transferring its residents’ data to nations outside the EU. However, organizations were able to get around this difficulty thanks to the US-EU Privacy Shield, a transatlantic data transfer mechanism. It was legally recognized until the Court of Justice of the European Union (CJEU) declared it invalid in July 2020 under the General Data Protection Regulation (GDPR).
The CJEU’s judgement was partially based on the reasoning that the US government’s surveillance practices are considered illegal under the GDPR and the EU Charter of Fundamental Rights. The personal data of an individual present within the EU’s boundaries can only be transferred out of the territory to a non-EU nation if the latter’s data protection laws are deemed adequate by the European Commission.
Companies were still allowed to move user data outside the EU under Standard Contractual Clauses (SSCs) in spite of the CJEU verdict. A month later in August 2020, the Irish Data Protection Commission (IDPC) claimed that these SCCs were not in line with the GDPR and proposed a halt to transference of European user data to the US. A final decision on this matter is expected to be reached in early 2022.
Beginning December 2020, the EU’s ePrivacy Directive which puts limitations on the use of data across messaging products and recommends massive penalties for non-compliance also came into effect. In its 10-K filing, Meta says that its business has already been subject to complicated legislative and regulatory requirements (including the GDPR) and continues to face more of them. This could severely affect its product development, incur huge compliance costs and harm its bottom-line, in general.
Will Facebook and Instagram Be Pulled From Europe?
Meta’s prediction of needing to pull Facebook and Instagram out of the EU is mostly being viewed as an empty threat, and evocative of the Australian media bargaining code debacle. Also, after having had over $230 billion of its market value wiped out last Thursday, Meta can hardly be seen as serious in its decision to consider withdrawing its services from an entire continent.