Meta threatens (again) to shutter Facebook and Instagram in Europe
The firm claims changing laws and regulations are impacting critical operations
Meta Platforms, Facebook's parent company, has warned that it may have to pull many of its products and services, including Facebook and Instagram, from the European market if the company is no longer able to transfer European users' data to the United States, following the Schrems II decision.
In its annual report to the US Securities and Exchange Commission (SEC) last week, Meta blamed evolving laws and regulations from European courts, regulators and legislative bodies, which it says are impacting the firm's 'critical operations'.
'If a new transatlantic data transfer framework is not adopted and we are unable to continue to rely on SCCs [standard contractual clauses] 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 wrote.
It added that the decision would 'materially and adversely affect' the company's financial condition, business, and results of operations.
Schrems II was a key ruling by the European Court of Justice (ECJ). In July 2020 the ECJ ruled that the transatlantic Privacy Shield agreement between the EU and the US was invalid, because it was unable to protect European users' data from US surveillance mechanisms.
However, the court allowed some tech firms like AWS and Google to use SCCs as a legal mechanism for data transfers, with some adjustments.
Meta relies on SCCs to transfer data today, but has cautioned that they could be subject to 'regulatory and judicial scrutiny'.
The company says Ireland's Data Protection Commission (DPC) has sent a preliminary draught ruling, stating that Meta's use of SCCs to transfer European data is in violation of the GDPR.
The case is significant for Meta, which could be forced to store EU users' data locally if the DPC orders it to stop moving data to the USA for processing.
In an affidavit submitted to Ireland's High Court in Dublin in September 2020, Facebook Ireland said that the DPC's order (to not send citizens' data to the USA) would force the company to stop providing its services in Europe, leaving nearly 410 million people unable to use the popular social media platforms.
In May 2021, Ireland's High Court dismissed Facebook's attempt to block the DPC's ruling, and allowed the regulator to proceed with its investigation.
The DPC still needs to submit a final draft of its order to EU privacy regulators. If the draft is approved it could have a widespread impact on tech firms like Facebook, which have been conducting transatlantic business online and transferring EU users' data to the USA.
Meta says new rules and regulations could result in 'unfavourable outcomes,' impeding the creation of new products while also causing negative publicity and reputational damage to the company. They could also compel the firm to change or cease its current business operations.
Last week, Meta shares fell sharply, after the company reported that Facebook lost about 1 million daily active users worldwide in Q4'21 for the first time ever.
The revelation resulted in more than $250 billion being wiped off the company's value.
On a conference call with investors, CEO Mark Zuckerberg said he was "proud" of the work the firm had done in 2021, but acknowledged that it faced tough competition from rivals like TikTok.
The firm has invested $10 billion on its vision of an immersive virtual reality system, a variant of the metaverse concept. It cautioned that it is facing "headwinds from both increased competition for people's time and a shift of engagement."
Computing says:
Meta is taking the line that large firms love to adopt when threatened with regulation: that it is unworkable, that following it will hurt their competitiveness, and that it will result in service loss. It's a threat couched to look like a warning, and for this reason regulators must stick to their guns.
The point of Schrems II and the GDPR is to protect consumers; if Big Tech firms - which love to boast about their agility, after all - find their existing practices unsustainable in the face of that, then they must change.
Let's not forget that, as much as coverage of Meta's recent earnings has focused on a small drop in Facebook's users, the company still declared nearly $30 billion in profits last year. It can afford to look for an alternative system.