Tech companies can have presence anywhere around the globe. But wherever it is available, it needs to obey local laws.
Facebook and Instagram are two of the largest social media networks the world has ever seen. And its parent company, Meta, is facing a number of problems in Europe.
At this time, the European Union regulators are working to create a legislation that would force all companies to process European user data on local servers located within Europe.
This legislation would essentially prevent Meta from transferring, storing and processing the data of its European users on servers that are based in the U.S..
Meta said that such legislation would greatly limit its ability in sharing data with its products and services, and would ruin user experience, and its ability to target ads.
Considering that Facebook and Instagram rely on ads for revenue, such legislation in the EU would hamper Meta's business, and may make the services not profitable.
The company said that it will "likely be unable to offer a number of our most significant products and services, including Facebook and Instagram, in Europe," if its platforms are unable to transfer data from the region back to the U.S.
Because of this issue, in its annual report, Meta threatened to pull Facebook and Instagram from EU users.
And EU officials don't really much care.
German Economy Minister Robert Habeck and French Finance Minister Bruno Le Maire commented on Meta’s annual report and the possibility of Facebook and Instagram being shut down across the EU, saying that Meta needs to abide the new EU regulations.
If not, it shall be banned across Europe.
"After being hacked I’ve lived without Facebook and Twitter for four years and life has been fantastic," said Germany’s Economy Minister Robert Habeck to reporters.
"I can confirm that life is very good without Facebook and that we would live very well without Facebook," said France’s Finance Minister Bruno Le Maire during the same conference.
Before the legislation, U.S.-based companies could use what is called the 'Privacy Shield', which is a data transfer framework for transatlantic data transfer. It was meant to regulate transatlantic exchanges of personal data for commercial purposes between the U.S. and the EU.
One of its main purposes, was to allow U.S. companies to more easily receive personal data from EU entities under EU privacy laws meant to protect European Union citizens.
However, back in 2020, the treaty was annulled by the European Court of Justice because of data protection violations.
Because of this, the EU started restricting U.S. companies from sending the data of European users to the U.S..
In the meantime, they have been using Standard Contractual Clauses (SCCs) as a workaround. This is possible because the ruling that annulled the treat does not stop data transfers between the EU and other foreign countries as the court upheld its use.
But still, the officials in both the U.S. and the EU are trying to work on a new treaty. Regardless, the EU still requires all companies to achieve compliance with the General Data Protection Regulation (GDPR).
And those that don't have compliance shall continue to get warnings, fines, and even bans.
"The GDPR not only applies to organizations located within the EU but it will also apply to organizations located outside of the EU if they offer goods or services to, or monitor the behavior of, EU data subjects. It applies to all companies processing and holding the personal data of data subjects residing in the European Union, regardless of the company’s location,” GDPR explanation says.
It's worth noting that Meta has hundreds of millions of users using both Facebook and Instagram in Europe.
Without the two products, the withdrawal should create a huge impact on EU citizens. And not just that, as the impact on Meta would be massive, simply because the company could lose billions of dollars.
What's more, WhatsApp the popular messaging app, could also be affected by this.
After poor performance, controversies after controversies, as well as Meta's Horizon Worlds' harassments issues, Meta just lost hundreds of billions of dollars when it's stock fell more than 25% in the market.
A spokesperson for the company said that Meta has "absolutely no desire and no plans to withdraw from Europe, but the simple reality is that Meta, and many other businesses, organizations and services, rely on data transfers between the EU and the U.S. in order to operate global services."
Because of this, Meta plans to negotiate with the regulators, or to maybe influence another instate a new transatlantic data transfer pact.
