Meta’s earnings call yesterday was bullish on better-than-expected sales. However, buried in its investor disclosures is a harsh warning about approaching regulatory risk in Europe, where a judgment is likely in a couple of weeks (by May 12) that might force the tech giant to cease its transatlantic data transfers.
Meta’s CFO noted in its Q1 2023 report that the Irish Data Protection Commission (IDPC) would publish a judgment in May in its previously revealed probe about transatlantic data transfers of Facebook EU/EEA user data, including a suspension order and a fine.
The ongoing dispute between US surveillance legislation and EU privacy rights has been discussed here and here. Regular TechCrunch readers know that Meta hopes a new high-level data transfer accord would remove EU data export legal ambiguity and save it in Europe.
However, discussions for this alternative arrangement have taken longer than expected, and EU institutions are considering the December Commission draft decision. As a result, the group revised its forecast in December, believing the pact would be concluded by July 2022.
Since then, numerous EU agencies studying the accord have raised reservations, so there’s no clear timeline. (If a new deal will withstand the expected legal challenges, considering the EU Court of Justice overturned the two preceding pacts.)
In its earnings report, Meta tells investors it’s hopeful the new EU-US data framework will arrive soon enough to be implemented before the deadline for a suspension of its EU transfers, which would allow it to reboot its claim to have an authorized mechanism for its EU transfers and avoid the suspension order. However, the company also warns it “cannot exclude the possibility” that adoption won’t happen soon enough.
“Our ongoing consultations with policymakers on both sides of the Atlantic continue to indicate that the proposed new EU-U.S. Data Privacy Framework will be fully implemented before the deadline for suspension of such transfers, but we cannot exclude the possibility that it will not be completed in time,” Meta writes. “We will also assess how the IDPC decision may affect our data processing operations even after a new data privacy framework is in place.”
The social media behemoth was questioned about how regulatory orders to freeze EU-US data transfers would affect sales during an investor call. CFO Susan Li responded by hoping the new high-level structure could salvage it. However, she cautioned investors that this escape hatch might not open soon. Meta is losing “roughly 10%” of its global ad income from EU Facebook advertisements.
Li cautioned that Meta could not predict the total impact of any EU data suspension without knowing the final order’s terms, such as its duration. Meta’s CFO previously said that ad revenue growth was best in the “Rest of World” category (9%), followed by North America and Asia-Pacific (6% and 4%, respectively), while Europe decreased by 1%.
