Facebook’s parent company, Meta, cites concerns, as of late, regarding the future of its European operations. If the US and EU fail to reach a new data transfer agreement, future operations remain in question.

CEO Mark Zuckerberg’s company Meta is threatening to pull the plug on Facebook and Instagram in Europe. Meta warns that it may withdraw products and services, including Facebook and Instagram, from Europe. This will occur if the EU blocks data transfer from the EU to the US due to the lack of an international agreement.

Fanning the Fire

Meta’s warning, issued in its annual report last week, acts as the precursor to a statement from a Meta spokesperson on Monday. It calls for the two powers to establish “clear, global rules to protect transatlantic data flows over the long term.”

Data privacy concerns with the European Union are adding to the company’s woes. One governance scandal after another is constantly fanning the fire. Last week, Meta recorded the largest one-day market cap loss of any U.S.-listed stock in history. This is the result of a bleak outlook beset by competition from ByteDance’s TikTok and $10 billion in Apple-related ad targeting headwinds.

In a 10-K annual filing with the U.S. Securities and Exchange Commission, Meta warns investors regarding the future of U.S. and EU data transfer agreements. The parent company claims that it may shut down its core operations in the region. This will “materially and adversely” affect its financial performance, it says.

A Final Decision

Due to a structure known as standard contractual clauses, data transfers are continuing whilst a new agreement is negotiated. However, due to a ruling by the Irish data protection agency in August 2020, even this process is in danger. In coming months, a final decision on the legality of using standard contractual clauses for data transfers is necessary.

With the future of EU-US data transfers uncertain, Meta holds concerns that it is unable to continue operations if standard contractual clauses or a new agreement comes to exist.

International Agreements

Europe has stringent privacy laws in place to protect internet users across the European Union. This is a problem for US-based technology companies like Meta. These companies rely on international data transfer agreements to transfer, store, and process data at their data centres in the United States.

The U.S. is unable to provide adequate safeguards against government spying for EU citizens. In July 2020, a top European court rules that the most recent data transfer agreement between the EU and the US is invalid. Data transfers have been able to continue while a new agreement is formed thanks to a mechanism known as standard contractual clauses.

Although Meta is one of the largest and most visible companies dealing with uncertainty, it is far from the only one. Multitudes of U.S. and EU-based companies have current concerns about the future of data transfers; and are eagerly awaiting a new agreement to ensure the long term viability of their operations.

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