Facebook: Our future in Europe is unclear

This post was originally published on October 8, 2020.

Facebook says its fundamental service delivery model is under threat in Europe, as it does not know how it will adequately comply with an EU ruling preventing it from transferring data from the EU to servers in the U.S.

The ruling, issued in July by the European Court of Justice, pointed to widespread digital surveillance in the U.S., and determined that the fundamental rights of EU citizens under GDPR provisions could not be guaranteed on servers outside Europe.

This decision struck down “Privacy Shield,” a previous agreement between the European Union and the U.S. that allowed free movement of data between the two regions.

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Yvonne Cunnane, Facebook’s associate general counsel, said in a court filing last month that enforcing the data-transfer restrictions would cripple its business in Europe.

“It is not clear … how, in those circumstances, it could continue to provide the Facebook and Instagram services in the EU,” she stated.

The court document was submitted after Ireland’s Data Protection Commission (DPC) ordered Facebook to suspend data transfers overseas.

Facebook’s legal team maintains that the company, which has 410 million users in Europe, was singled out unfairly. It argues that while it isn’t the only tech firm that transfers data from Europe to the U.S., it’s been targeted for no apparent reason and was given a “manifestly inadequate” timeline of only three weeks to respond to the ruling.

Facebook also says that the fact that one person was responsible for the decision of the DPC reflects the “inadequacy of the investigative process” and the independence of the decision making.

News headlines interpreted the appeal as a threat to leave the EU, although the company has since stated it has no plans of doing so.

So far, no one is calling Facebook’s bluff

“The idea that Facebook would withdraw from the European market is absurd brinksmanship that I don’t think anyone truly believes,” said Michael Veale, a technology policy researcher at University College London, while talking to Vice.

And by Facebook’s own admission, its advertising and surveillance capitalism-based products have helped European businesses rake in over €208 billion in sales. That’s a significant chunk of revenue that it won’t let slip so easily.

To understand Facebook’s motivations, let’s examine the fact that it made over 18 billion USD in net profit in 2019. Most of this revenue came from its ability to hoard data and help advertisers with more precise targeting.

It doesn’t have a stellar track record of safeguarding this data either, with various privacy breaches and a record 5 billion USD fine that the FTC imposed on it in March 2019. The year-long investigation by the FTC found that Facebook repeatedly “used deceptive disclosures and settings to undermine users’ privacy preferences” and that “these tactics allowed the company to share users’ personal information with third-party apps that were downloaded by the user’s Facebook ‘friends.’”

The fact is Facebook has far more to gain by keeping its user data centralized in North America. That way it’s safely squirreled away from overbearing European regulators who could demand to audit its data handling practices. The EU is far stricter than U.S. regulators on the issues of privacy and data integrity; any misdemeanors would elicit a much harsher fine and a possible halt to its operations.

This opening salvo by Facebook is likely an emerging cat-and-mouse game. After all, it can afford to pay for an army of lawyers, lobbyists, and public relations executives to help get favorable legislation. For its part, Ireland’s DPC hasn’t blinked despite the fact that Facebook has over 5,000 employees in Dublin, the site of its international headquarters.

We expect plenty of more developments on this issue in the months ahead. Neither Facebook nor the EU will back down easily, but both have much to lose if an agreement cannot be made. Facebook makes approximately 13 USD of revenue per user in Europe each year. And the EU benefits from the thousands of jobs Facebook brings, the taxes it pays, and the impact it has on local businesses that use the platform to reach customers.