Meta’s ability to serve targeted advertisements to European users may be “severely restricted” by European data regulations.
Update, February 9 (6:15pm ET): Meta not planning to leave Europe
what you need to know
- Meta warns in SEC filing that it could pull Facebook and Instagram from Europe if it doesn’t allow transfer of user data from the EU to the U.S.
- A July 2020 ruling by the Court of Justice of the European Union invalidated the U.S. Privacy Shield, which allows U.S. companies such as Meta to collect and transfer data from EU subjects.
- Meta said the new restrictions on transatlantic data transfers would adversely affect its advertising business.
Meta “warned” in its 2021 annual report to the U.S. Securities and Exchange Commission that if it can no longer transfer its users’ data from Europe to the U.S., it may not be able to continue offering Facebook and Instagram in Europe (via Bloomberg).
Until July 2020, other U.S. tech giants such as Facebook and Google can transfer data from EU subjects to U.S. servers under the EU-U.S. Privacy Shield. However, the US law was declared invalid by the European Court of Justice, which claimed that it did not provide sufficient safeguards for EU subjects.
In addition, other legal frameworks that Meta relies on to move data between its European and US servers, such as Standard Contractual Clauses (SCC), have also come under regulatory scrutiny. A draft decision by the Irish Data Protection Commission in August 2020 concluded that the social networking giant’s reliance on the SCC to transfer European users’ data was not in compliance with the General Data Protection Regulation (GDPR).
It also recommends a moratorium on transfers of user data from the EU to the US. A final decision on the matter is expected sometime in the first half of 2022.
Meta said its advertising business would be “adversely affected” if new transatlantic data transfers were not adopted, or if it could not rely on SCC or other alternatives for data transfers from the EU to the US.
It remains to be seen whether Meta’s “threat” will force European regulators to change their stance on the SCC, but the tech giant may not actually stop offering services in the Old Continent. Earlier this month, Facebook reported a drop in its daily active users for the first time. While the service had 1.93 billion daily active users in the third quarter of 2021, that number dropped to 1.929 billion in the fourth quarter.
Update, February 9 (6:15pm ET) ― Meta clarifies its position
Following reports that it was threatening to leave Europe, Meta explained this week that this was not the case, pointing to the risks posed by the EU making the Privacy Shield ineffective.
“We have absolutely no desire to exit Europe; of course we don’t,” Mehta said in a blog post. “But the simple reality is that Meta, like many other businesses, organisations and services, relies on data transfers between the EU and the US to operate our global services.”
“We are not alone. At least 70 other companies from various industries, including 10 European businesses, have also raised risks around data transfers in their earnings filings.”
Meta said it continues to monitor the potential impact that friction between U.S. and European Union privacy laws could have on millions of people.