Meta’s earnings call yesterday was bullish on better-than-expected revenue. However, buried in its investor disclosures is a stark warning on looming regulatory risk in Europe, where a decision is expected in a matter of weeks (by May 12) that could force the tech giant to suspend its transatlantic data flows.
Meta’s CFO noted in its Q1 2023 report that the Irish Data Protection Commission (IDPC) will publish a judgement in May in its previously revealed inquiry relating to 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 will remove EU data export legal ambiguity and save it in Europe.
According to Meta, the EU’s data flows rule threatens around 10% of the company’s global ad income.
However, negotiations over this replacement deal have taken longer than expected, and EU institutions are still reviewing the December Commission draft decision. In December, the bloc revised its forecast, stating it believed the pact would be finalized by July 2022.
Since then, numerous EU institutions studying the accord have raised reservations, so there’s no clear timeline. (Or whether a new deal will survive the expected legal challenges, given 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 how regulatory orders to freeze EU-US data flows would affect sales during an investor call. CFO Susan Li responded by hoping the new high-level framework will salvage it. She warned investors that this escape hatch may not open in time. Meta is losing “roughly 10%” of its global ad revenue from EU Facebook ads.
Li cautioned that Meta cannot predict the overall impact of any EU data suspension without knowing the final order’s terms, such as its duration.
Meta’s CFO previously reported 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 1%.