Can Meta afford to pull Facebook and Instagram out from Europe?

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Meta Platforms Inc. has once again threatened regulators about the possible move that would result in Facebook and Instagram slamming doors on users in Europe.

And guess, what lies at the heart of this tussle with the regulators and Meta? No prize for guessing it right – it users’ data.

For months, European Union regulators have been negotiating with the U.S. to replace a transatlantic transfer pact on which thousands of companies relied. Suspecting that the privacy of users’ will go for a toss once their data is put from Europe, the EU Court of Justice had struck the original pact down in 2020. Now the European regulators, in close collaboration with the US, are reportedly working on a new agreement.

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The main crux of the pact is access to users’ data which Meta wants to transfer to the U.S. anyhow.

Meta stated in its annual report, published Thursday, that if the new or existing agreement doesn’t permit to shift users’ data to the U.S. it would be forced to make some unpleasant decisions. By employing pressure tactics to have favorable results, Meta expressed its inability to operate and offer its most significant products, including Facebook and Instagram, to users in Europe.

This is not the first time when Zuckerberg-led internet giant has tried to influence the negotiation in a bid to get favorable terms. While filing its annual report in 2020 Meta expressed similar intentions to withdraw its offerings from Europe. However, it didn’t specifically quote the names of Facebook and Instagram in that report.

“We have absolutely zero desire or plans to withdraw from Europe,” said a Meta spokesperson in an email statement to Bloomberg.

These comments show the growing tension between lawmakers and social media company over user data ownership.

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So, why is Facebook showing signs of restlessness and continuing passing statements that are only jeopardizing the situation with lawmakers?

The answer of it lies in the latest fall in stock value of Meta. Last week meta’s share tanked 26%, making the company incur a loss of more than $200 billion. This was the largest stock market wipeout ever. The fall was largely due to the first-time ever declined DAUs, loss of $10 billion in its Real Vision division. But it was Apple that made the biggest dent on Meta. The internet giant openly expressed its fear of losing $10 billion in advertising revenue due to Apple’s new iOS policies that have crippled the wings of Meta which mostly relies on advertising dollars.

But that’s not all. Apple is expected to make the tracking even more difficult with the launch of iOS 15, and may virtually kill the revenue potential from iOS ecosystem for Meta.

European Union, Apple, declining users; Meta is fighting at multiple fronts, all at the same time! In such a situation, getting control of European users the way Meta wants is the topmost priority for Zuckerberg and Team, apparently. It’s widely believed that the secret of Facebook’s success lies in users’ data, and only Google and Facebook know how to make the most of it, conditioned to have complete control over it.

According to the European Commission, data transfer negotiations with Washington have been intensified. However, it is time-consuming due to the complexity of the issues and must strike a balance between national security and privacy.

“Only an arrangement that is fully compliant with the requirements set by the EU court can deliver the stability and legal certainty stakeholders expect on both sides of the Atlantic,” says the spokesperson of European Commission.

Not The First Time

The biggest hurdle for Zuckerberg and Team is Max Schrems, a privacy activist, who has long challenged Meta in Irish courts. This is where the social media giant has its European base. He argued that EU citizens’ data are at risk once it is transferred to the U.S.

Meta (Facebook) requested a judicial review in 2020 of the Irish Data Protection Commission’s preliminary decision that it may have to stop trans-Atlantic data transfer using standard contractual clauses. Meta faced a blow as an Irish court rejected the challenge last year, saying it did not establish “any basis” to question the findings of the Irish watchdog.

According to Patrick Van Eecke, partner and head of cyber- and data at law firm Cooley LLP, data protection authorities are more concerned about these types of supplementary security measures, which have allowed companies to send data back to them in the absence of a new contract.

Van Eecke stated, “It is not surprising that companies outside Europe are rethinking whether it makes sense to continue to offer services to the European Market as there aren’t many options anymore.”

This is not the first time Facebook threatened to pull its services from a country. In 2020, the company expressed its intention to block Australian publishers and people from sharing news in 2020 to counter a proposed law that would force the company to pay media companies for their articles.

The company also stated that it was committed to Europe.

Nick Clegg, global affairs head at the company, stated that he was “absolutely crystal clear” during a 2020 event. He clarified that there was no desire, wish, or plans to stop providing services in Europe.

Whatever may be the case, odds are not favoring Meta. If the battle with Apple is not big enough to give Zuckerberg sleepless nights, it’s losing control over European users, and increasing losses at other divisions are making the situation more troublesome for him.

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