Likely nothing but an empty threat to woo EU regulators in its favor
Meta (the company formerly known as Facebook) is threatening to pull its social networks Facebook and Instagram out of the EU if regulators won’t let it process personal user data in both Europe and the US. The company is making this clear in a report to the US Securities and Exchange Commission (via Pocketnow).
In the report, Meta claims that it’s vital to its business to process data both in the EU and the US to make its operations and its ad targeting business work flawlessly:
If we are unable to transfer data between and among countries and regions in which we operate, or 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 problem is that EU law requires that its citizens’ data is processed on servers located in Europe only, with previous data sharing agreements between the US and the EU marked as insufficient and no new regulations on the horizon that would make the practice legal. Meta is hoping to find a new agreement in 2022, but if that doesn’t happen, the company sees a dire future for its social networks in the EU:
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, which would materially and adversely affect our business, financial condition, and results of operations.
Interestingly, the company isn’t mentioning its encrypted messenger WhatsApp as an argument. While the service could be implicitly meant with the “including Facebook and Instagram” language in the statement, it would seem weird that the company wouldn’t use WhatsApp as additional leverage since it’s pretty much the de-facto messaging standard in many EU countries. Given the encrypted nature of WhatsApp and a lack of advertisements within the service, it’s possible that decoupling European and American data just wouldn’t make much of an impact on the company’s bottom line.
If you ask me, it’s unlikely that Meta will actually pull through with this threat, no matter which way regulators sway. There’s just too much money to be made in the EU, even if advertisements can’t be tailored 100% to users anymore. Losing a big market like this would be bad news, especially in the light of Meta’s historic 25% loss in market value following its quarterly earnings report. It’s likely just an empty threat that’s supposed to make the EU reconsider its regulations surrounding data sharing across its borders.
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