A new EU law requires companies that gather user data within the union to keep and process that data on European servers. Facebook’s and Instagram’s data, however, is processed on both US and European servers. Which is crucial for ad targeting and businesses that operate on those social platforms.
In the report submitted to Securities and Exchange Commission, Meta suggests that if the company fails to comply with the new EU regulations. It will simply stop providing its Facebook and Instagram services within the union. Meta’s VP of Global Affairs, Nick Clegg, argues that this would be detrimental to a lot of businesses in the EU that rely on the services and ads the company provides.
“If we are unable to transfer data between and among countries and regions in which we operate. If we are restricted from sharing data among our products and services. It could affect our ability to provide our services, the manner in which we provide our services or our ability to target ads,” the statement read.
Last week’s financial report sent Meta’s stock plummeting by 25% after the company lost daily active users for the first time in its history. This means the company is likely just trying to put itself in a more beneficial negotiation position instead of actually planning on actually acting up on its threats.
Court Filings
In July 2020, the European Court of Justice ruled the data transfer standard between the EU. The U.S. doesn’t adequately protect European citizens’ privacy.
The court, the EU’s highest legal authority, restricted how U.S. firms could send European user data to the U.S. after concluding EU citizens had no effective way to challenge American government surveillance.
U.S. agencies such as the NSA can theoretically ask internet companies like Facebook and Google to hand over data on an EU citizen and that EU citizen would be none-the-wiser.
The court ruling invalidated the EU-U.S. Privacy Shield agreement, which enabled firms to send EU citizen’s data across the Atlantic. As a result, companies have had to rely on SCCs.
What’s Next
After the market closed, Meta announced that Peter Thiel would not stand for re-election from its board of directors. The billionaire investor has long served as a key advisor to founder and CEO Mark Zuckerberg.
“Peter is truly an original thinker who you can bring your hardest problems and get unique suggestions,” Zuckerberg said in a press release. “He has served on our board for almost two decades. We’ve always known that at some point he would devote his time to other interests.”
Thiel reportedly plans to spend more time on his political endeavors. His departure comes at a time when Facebook is struggling with intensifying competition from the likes of TikTok. This slowing user growth, and rising expenses related to its metaverse initiatives.
European authorities and the US government are still talking through ways to resolve the issue. The social media giant recently saw its worst-ever plunge in market value, after disappointing quarterly results that raised questions about its future.
Its signature Facebook platform saw a small dip in daily users globally at the end of 2021. The first such decline for a platform relentlessly focused on growth.
The company’s preoccupation with adding users was central to the whistleblower scandal last year. In which leaked internal documents underpinned press reports saying the company prioritized growth over safety.
