Meta’s Threat to Exit Europe Is Another Reminder for Marketers to Diversify

Meta Platforms Inc. has once again considered pulling the plug on Europe, due to tightening data-sharing regulations. In its annual report issued last Thursday, the social media giant issued a warning it could discontinue Facebook and Instagram in the EU if it is unable to keep transferring user data back to the U.S., amid negotiations between European regulators over the transatlantic data pact. Meta's platforms like Facebook transfer user data back to the U.S. to avoid creating regional silos, which would cause logistical challenges for the platform. The friction is evident on both sides of the Atlantic after the EU Court of Justice scrapped the data-transfer pact in 2020 over the concern that EU citizens’ data would not be safe in the U.S. Currently, the European regulators are working on legislation to establish how EU citizens’ data will be transferred to the U.S. While withdrawing from a major market is an extreme outcome, this is a reminder that marketers should not put all their eggs in one basket. Without a new or existing transatlantic data framework, Meta can not rely on the Standard Contractual Clauses (SCC) between the two regions and is “likely be unable to offer a number of our most significant products and services, including Facebook and Instagram, in Europe,” reads the annual report. While the original SCC provides a framework for data transfer and continued data processing across different borders, the new SCC focuses on the ability for companies to be able to continue to transfer data, but also incorporate data transfer impact assessment. The challenge here is “the company who is a data exporter, (such as Facebook Ireland) and the data importer (such as Facebook U.S.), need to each do a transfer impact assessment to analyze whether or not there is a way for the transfer to happen to minimize the risks for the processing of the EU personal data,” said Fiona Campbell-Webster, chief privacy officer at MediaMath. As a part of the data transfer assessment, companies will need to review the U.S laws and whether the transfer meets the same level of data protection standards as that in the EU. If not, then both the regions may agree to implement further supplementary measures to adhere to the requirements of GDPR. If there is no supplementary measure in place, then the exporter—in this case, the EU—will be compelled to avoid, suspend or terminate the transfer to avoid compromising the level of protection of the personal data. Drastic but catastrophic for marketers Meta has no desire and plan to pull out of Europe and there are several factors would affect both the parties, including “the fact that it’s millions of dollars in ad revenue and would affect hundreds of millions of users in the European Union,” said Pedram Tabibi, partner at law firm Meltzer Lippe. This is not the first time Meta has threatened to bid adieu to the European market. In its previous annual report the tech giant stated that if it is not allowed to use standard contractual clauses, it would not be able to operate its business in parts of Europe. Assessing the developments, Tabibi warns advertisers to consider their business and assess how much they’re putting into one platform. “Because there’s a possibility that a platform could shut down," he said. "And if a business is significantly invested in that platform, obviously that would have a major impact." The law of privacy and data access is constantly developing. One way marketers can be prepared is to stay up to date with these developments, “especially for the ones invested in Facebook and Instagram for their ad revenues,” said Tabibi. Moving forward, both parties are going to continue to discuss agreements to avoid such a drastic outcome. If no solution is found, it would materially and adversely affect Meta’s business, financial conditions and results of operations. As for the advertising industry and companies, the “impact would be catastrophic,” said Campbell-Webster. Despite Tumultuous 2021, Meta Posts Revenue Gains of 20% for Q4, 37% for Full Year