Meta warns of shutting down Facebook, Instagram in Europe - Is it an empty threat?

(Image credit: Facebook)

Facebook’s parent company Meta has said that it may consider shutting down its services within the EU over the ongoing legal challenge on how it handles EU user data. It threw the threat of closing down in its annual report that it put out last week even as European authorities are said to be working on a law that will restrict the use of Europeans' data. 

Meta wants to be allowed to transfer, store and process EU data on its US-based servers. It pointedly said: “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.”

EU is not ready to relent

Meta may be talking tough, but EU is not ready to be cowed down. One of its lawmakers said on Twitter: "I have always called for an alternative to the EU US #privacyshield to find a balanced agreement on data exchange + always called for #GDPR flexibility. However, #META cannot just blackmail the EU into giving up its data protection standards, leaving the EU would be their loss."

He is indeed right. For, Meta makes around $6.8 billion a year in Europe in advertising revenue.

Meta itself said that if it had to shut down in Europe it “would materially and adversely affect our business, financial condition, and results of operations.”

But data is central to its ad business, but the transfer of information from Europe is now in limbo after the 'Privacy Shield' online data arrangement between Europe and the United States was struck down by an EU court in July 2020.

"​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," Meta said.

So will Meta walk the talk?

The crucial question is will Meta follow up its words with action. Meta is clearly caught in a cleft stick. It needs data from Europe for its ad revenue. Without those details its ad revenue from Europe would anyway suffer. So, in a lose-lose situation, it need not stay in Europe.

But Meta has just received an infamous hammering at the stock market after Facebook reported decline in user numbers for the first time ever. So, forget ad revenues, it cannot afford to lose any more chunk of users. It needs Europe at least just for the numbers.

As of now, it is hedging its bets. Meta has been quoted as saying: "We have absolutely no desire and no plans to withdraw from Europe, but the simple reality is that Meta, and many other businesses, organisations and services, rely on data transfers between the EU and the US in order to operate global services."

In Australia last year, Meta banned users there from sharing news articles for several days because it objected to a law designed to force them to pay publishers for content. But eventually it reactivated news stories after negotiations with the government resulted in tweaks to the law.

So Meta can still negotiate with European authorities and work out some face-saving compromise. But things are not as smooth as they were once for it.

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Balakumar K
Senior Editor

Over three decades as a journalist covering current affairs, politics, sports and now technology. Former Editor of News Today, writer of humour columns across publications and a hardcore cricket and cinema enthusiast. He writes about technology trends and suggest movies and shows to watch on OTT platforms.