Mark Zuckerberg-owned Meta, the parent company of Facebook and Instagram, has said that it may be forced to shut down its two popular social media platforms in Europe in the next few months.
The sensational claim was made in Meta's annual filing with the Securities and Exchange Commission, which mandates publicly traded companies to disclose issues that may affect profits and losses.
What's the issue?
While it is well known that the business model of social media platforms like Facebook and Instagram is heavily dependent on user data, Europe may soon cut this source.
It all started when Europe tightened its data security laws by passing the General Data Protection Regulation (GDPR) law in 2016. After the law came into force, companies like
Facebook relied on the EU-US Privacy Shield, a framework that regulated data transfer across the Atlantic, to carry on their business in the continent.
However, in July 2020, the Court of Justice of the European Union ruled that the EU-US Privacy Shield agreement was invalid. Nonetheless, the court allowed the companies to leverage the Standard Contractual Clauses (SCC), which allow data to be transferred from the EU to another country and still be compliant with the GDPR.
For almost a year and a half, Meta has run the two platforms using these clauses but even the SCC may soon be scrapped by the court.
A petition was filed against the SCC by Max Schrems, an Austrian privacy activist. Hearing the petition, the Court of Justice of the European Union has observed that US law does not ensure an “adequate level of protection”. The court remarked, "For the data transfers to be valid, US law would have to be essentially equivalent to those required under EU law."
As this case had come up through an Irish court, the country’s Data Protection Commission reviewed Meta's data privacy policy. The Irish regulator, in its preliminary decision, said that Meta’s data privacy safeguards are "not up to par". A final order is likely in the next few months. If the Irish regulator stands by its preliminary decision, Meta might have to pull out of Europe.
"If a new transatlantic data transfer framework is not adopted, we will likely be unable to offer a number of our most significant products and services, including Facebook and Instagram, in Europe," Meta said in its annual filing. It added, "If the company were to pull Facebook and Instagram from the market, it would materially and adversely affect our business, financial condition, and results of operations."
EU's reaction
Speaking on Meta's claim of a likely shutdown in Europe, EU officials -- Robert Habeck (German Economy Minister) and Bruno Le Maire (French Finance Minister) -- clarified that if Meta doesn't abide by the new EU regulations, its social media platforms would be banned across Europe.
"I’ve lived without Facebook for four years and life has been fantastic. The European Union is such a big internal market with so much economic power that if we act in unity we won’t be intimidated by something like this," said Habeck.
Meta's damage control
After Meta mentioned the likelihood of pulling out of Europe in its annual filing, several media houses reported the development as the social media giant "threatening" to leave Europe. Reacting to such media reports, Meta has issued a statement saying, "There has been reporting in the press that we are 'threatening' to leave Europe because of the uncertainty over EU-US data transfers mechanisms. This is not true."
The company added, "We have absolutely no desire to withdraw from Europe; of course we don’t. But the simple reality is that Meta, like many other businesses, organisations and services, relies on data transfers between the EU and the US in order to operate our global services... Like other international and European businesses, brands and trade organisations, we hope to see continued progress in negotiations for a Privacy Shield replacement to protect transatlantic data transfers, ensure robust privacy protections and keep global communities, economies, businesses and families connected."
