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Global Economy

Meta threatens to end Facebook and Instagram – withdrawal or declaration of war?

Meta cannot comply with European data protection law. The company has said it will withdraw because of this. That could be a bluff to buy time.

This column represents the author's point of view. Here you will find information on how we deal with opinions in texts.

Meta, the company behind Facebook, WhatsApp and Instagram, is not having an easy time at the moment. The share price recently fell by more than 20 percent at times. One reason is the new data protection guidelines introduced by Apple in 2021. The finding is not surprising, because the problem is well known.

Apple has the smarter business model

Apple uses its operating system to force users to give consent for the release of data for advertising for companies like Facebook. By default, the company just grabs data that Apple wants to use for its own purposes and claims that this is contractually owed to Apple.

The fact that you need consent for all customer information that is marketed via Facebook and Instagram, which users can also refuse, Facebook hailed the advertising revenue. Apple is set to cost Facebook $10 billion.

Data protection slows down social media advertising

In fact: In the end, Apple skilfully circumvents the requirements of data protection. With the prevention of Facebook advertising, the advertising market of many European companies is slowed down. Not only industry giants like Adidas spend huge sums on social media marketing via Instagram and Co. Influencers and agencies also base their business in Europe on viral advertising via personalized addressing.

The core problem of data protection law for Facebook cannot be dismissed out of hand. According to the case law of the European Court of Justice from July 2020, data from Europeans may not be stored on American servers because they are not adequately protected there from access by the secret service and other authorities.

However, transatlantic data traffic is also essential for targeted advertising. In order to allow the data transfer, the European Union must reach an agreement on data protection. But because this is not in sight, Facebook can only work in conjunction with the European online advertising industry in permanent violation of the law and risks immense fines.

Facebook and Instagram: Meta is an advertising machine

Will Facebook carry out its threat? This is unlikely, because the European advertising market, despite all the losses, makes a significant contribution to Facebook's profits. Let's not kid ourselves: the main purpose of Facebook and Instagram is not for private individuals to exchange pictures and videos. It's running an efficient and cheap advertising machine that would prefer to ignore privacy entirely.

The strategy should be a game for time. The demand can put pressure on the EU Commission to reach an agreement with the USA in the foreseeable future that raises data protection in the USA and Europe to a comparable level. So it's helpful if you threaten the advertising industry and young people with withdrawing the information channel.

A permanent solution is not in sight

Without such an agreement, it is more difficult, if not impossible, to legally exchange personal data with the USA. The economy is currently making do with so-called standard contractual clauses, which offer a certain legal certainty. The companies have to check the legality of the transmission themselves and there are still risks. However, data transfer to the USA can only work with certainty if there is an agreement between the EU and the USA such as the abolished Privacy Shield.

The fact that Meta is also relocating its European business to Europe is technically and economically not an option. Once the new agreement is in place, it will be difficult to keep US intelligence off the lines. This is not reasonable for the USA for reasons of national security. The agreement that Meta now wants to enforce with public pressure will hardly convince the European Court of Justice to release the data of European citizens for access by US authorities. However, Meta could give the advertising industry a few more years of breathing space until the European Court of Justice also revokes the new agreement.

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