Meta could shut down Facebook and Instagram throughout Europe if regulators are unable to hammer out a permanent data transfer deal, the company warned in a recent SEC filing.
The claim from Mark Zuckerberg’s company came as officials in the European Union and US attempt to craft a new trans-Atlantic data transfer agreement. The EU’s Court of Justice struck down a previous agreement, dubbed Privacy Shield, in 2020, due to concerns it could not ensure data security for Europeans once it is sent to the US.
Without a transnational deal in place, Meta could face legal and regulatory obstacles when it transfers user data, which plays a key role in its lucrative advertising business that comprises the bulk of the company’s annual revenue.
“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,” Meta officials said in the filing.
Meta noted a shutdown of the platforms would “materially and adversely affect our business, financial condition, and results of operations.”
A Meta spokesperson said the company has no immediate plans to end service in Europe, though it is calling for “clear, global rules to protect transatlantic data flows over the long term.”
“We have 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 US in order to operate global services,” the Meta spokesperson said.
Meta’s warnings drew a sharp rebuke from European Parliament member Axel Voss.
“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,” Voss wrote on Twitter. “However, #META cannot just blackmail the EU into giving up its data protection standards, leaving the EU would be their loss.”
In the absence of a transnational deal, Facebook has relied on separate legal agreements called “standard contractual clauses” to stay compliant with strict European data privacy requirements.
But in late 2020, Irish regulators ordered Facebook to stop transferring user data out of the country, raising fresh doubts about the viability of standard contractual clauses.
Legal headaches in Europe are just one of many concerns for officials at Meta. Facebook noted the first drop in its average daily users in company history in its most recent earnings report.
The surprise decline caused Meta shares to plunge more than 25%, erasing more than $200 billion in market value in a single day. Zuckerberg lost a significant chunk of his on-paper fortune after the plunge.