What’s Happening With Facebook and the European Market?

Facebook’s parent company has been hitting headlines a lot recently, from scandals and arguments with national leaders to changing their name to Meta. This latest headline, however, has caught the attention of people across the world. We all know that Facebook are now the owners of many social media sites and communication platforms including Instagram and Whatsapp, so when news like this hits the headlines it is likely to affect a number of people – and as such, when Meta threaten to make such a significant change to their setup people are likely to sit up and pay attention. The latest talks with regards to removing Meta from Europe is certainly one that has got plenty of people talking.

What Happened Last Week?

Last week Meta threatened to pull out of Europe, taking Facebook and Instagram with them, meaning that millions of people would lose connections with family and friends as well as businesses losing platforms that are hugely important to their growth and success.

The argument started as a result of the data protection breaches involving Cambridge Analytica, which prompted the European Union to further examine what Meta/Facebook does with the data it collects. The Privacy Shield is an agreement between the EU and the US to ensure that any personal data exported from Europe to the US is adequately protected. After the Cambridge Analytica scandal, the EU questioned if this agreement was sufficient and launched an investigation.

What’s The Facebook Set-Up Like?

Facebook has a large base in Ireland to cover its EU operations, with all data being transferred back to Facebook’s US hub. New European data regulations would prevent Meta from transferring, storing and processing European citizens’ data on US-based servers. Meta warned that if no new framework was created to allow the company to use the Privacy Shield agreement then the company would have to withdraw from Europe. Meta argued that it would stop the company from being able to provide its services at the current level, resulting in the potential decision to withdraw. A statement read “We will be unable to offer a number of our most significant products and services, including Facebook and Instagram, in Europe.

The issue stems from the transfer of data between Facebook’s Ireland base and the headquarters in the US. However, Meta isn’t the only company to be affected by the Privacy Shield.

What’s Been Happening Over Recent Years?

In recent years Ireland has increasingly become known as a global technology hub as well as a gateway to the European Union. There are many reasons for this – Ireland is content as a member of the EU so that connection is secure. Secondly, the Irish government have invested in encouraging its citizens to be open to learning about and adopting new technologies. This means that Irish citizens are often one of the first EU countries where new technologies become widespread very quickly – ideal for a technology company. In addition to this, the Irish government have a policy of attracting foreign direct investors through a series of measures. Ireland offers a comparatively low rate of Corporate Tax, as well as a robust system of patents and royalties for companies based on the Emerald Isle.

It’s all of these systems that attracted Meta/Facebook to choose Ireland as the location for their EU headquarters, and the Privacy Shield deal between the EU and the US made it easy for Facebook to transfer information back to the US hub.

Why Are Things Changing For Meta/Facebook?

At the end of September 2020, an EU privacy regulator sent Facebook a preliminary order to suspend data transfers from the US about its EU users. Until this point, a basic EU privacy law dating back to the 1990s was used. The law stated that it was illegal to send EU data outside of the EU, but the US and EU negotiated the “Safe Harbour” system to allow the continued flow of information, which stated that US companies should adhere to EU data policies if they handle EU data. This was subsequently replaced by the Privacy Shield agreement, which is what’s currently causing issues.

Meta sends huge amounts of information back from the Ireland hub. This data includes technical statistics about how the apps are functioning, but also provides analytical data on users which allows advertisers to target people based on their demographics and usage of the app. Some of the data, such as bug reports, analytics of app usage, and user-generated reports, would cause issues if Meta wasn’t able to export it, other pieces of information not being transferred would simply dent Meta’s profits.

What’s Going To Happen?

Of course, Facebook aren’t the only international company to have headquarters based in Ireland, so many industries will be watching to see what decision is made and what happens moving forward. Gambling sites are often headquartered in the country too – not only Irish casino sites, but well established British brands and these will all be watching to see what happens. Of course, there may be the option for companies to move their offices to other countries or perhaps other parts of Europe but this is likely to be a long-winded and costly affair so something that companies will be keen to avoid.

Realistically, it’s unlikely that the EU will show Meta the door when there is such a large population whose job is or relies on social media, but negotiations are tense at the moment so it’s important to keep on top of the news to see what happens.  Recent EU changes including Brexit have led to many changes that companies could not foresee and therefore were not prepared for, so it stands to reason that they will be watching to see what happens before deciding on what action they need to take. Long term, there are likely to be some changes but it remains to be seen what those changes are.