European Union (EU) regulators have hit Meta Platforms with a massive fine for violating advert policies, the New York Times reported on Monday.
Meta faces an imminent block in its advertising services and a huge $414 million USD fine for forcing its users to accept personalised adverts on its social media services.
The ruling comes after the 27-country bloc inked its General Data Protection Regulations (GDPR) in 2018, restricting social media companies from mining data without user consent.
According to Meta’s Terms of Service agreement, Meta requires users to accept data collection for personalised ads or stop using its suite of services, the NYT wrote. Meta’s product lineup includes Facebook, Instagram, WhatsApp, and Meta virtual and mixed reality (VR/AR) devices.
The ruling calls for Meta to outline its compliance with the decision in three months’ time. Potentially, Meta may need to allow users to consent to targeted adverts. This could severely block a key revenue source for the firm if most users do not consent to share data.
Meta earned a record $118 billion in advertising revenues via the process, the report found. Citing analysts, it added Meta could lose up to seven percent of its advertising revenues due to the ruling.
Conversely, regulations across the United States do not include federal data protections. Most tech firms also use EU regulations in their global policies to streamline policies, the report said.
Meta’s Revenue Headwinds
The news comes after changes in Apple’s data collection policies battered Meta’s advert revenues in 2021. This led to Meta losing access to iPhone users, where most have blocked advertisers from tracking their activity. Meta reportedly lost $10 billion USD in earnings for 2022.
Responding to the ruling, Meta stated in a blog post on Wednesday that there had been a “lack of regulatory clarity” on the matter, adding,
“[The] debate among regulators and policymakers around which legal bases are most appropriate in a given situation has been ongoing for some time. This issue is also currently being debated by the highest courts in the EU, who may yet reach a different conclusion altogether. That’s why we strongly disagree with the DPC’s final decision, and believe we fully comply with GDPR by relying on Contractual Necessity for behavioural ads given the nature of our services. As a result, we will appeal the substance of the decision. Given that regulators themselves disagreed with each other on this issue up until the final stage of these processes in December, it is hard to understand how we can be criticised for the approach we have taken to date, and therefore we also plan to challenge the size of the fines imposed”
The tech giant restated its commitment to protecting user data. These efforts included updating its terms and privacy rules, creating tools to locate, download, and delete personal data, and others.
EU Explores Metaverse Regulations
The news comes after Margrethe Vestager, European Commissioner for Competition, urged EU lawmakers to explore the Metaverse to outline regulations.
At an online event in February last year, she explained regulators needed to learn their roles in the Metaverse. Additionally, she cited “concerns about Facebook’s possible dominance” on the spatial communications platform.
She said at the time: “We need to understand it before we can decide what actions would be appropriate.”
Meta previously threatened to pull out of European markets if EU regulators failed to guarantee data transfers to the US. It added it worked on protecting user data and building transatlantic data flow agreements amid GDPR. This aimed to resolve critical advertising revenue issues.
In May 2021, the Irish Data Protection Commission ruled it would possibly block data flows between the bloc and the US, suspending Meta’s data transfer requests temporarily.
At the time, Meta said in its US Securities Exchange Commission (SEC) report that failure to secure transatlantic data flows between the two groups could potentially block its services to Europe.
The issue has been resolved after European Commission President Ursula von der Leyen struck a deal with the US in March on transatlantic data transfers. The agreement comes after the months-long impasse over EU data privacy rights.
Von der Leyen stated at the time the deal would “enable predictable and trustworthy [EU-US] data flows, balancing security, the right to privacy and data protection.”
Meta’s Advert Policy to User Protection
Additionally, Meta’s Global Affairs Chief Nick Clegg reaffirmed last year his company had no desire or plans to withdraw its services from European users. He also stated in a previous interview its intentions to protect metaverse users and deepen cooperation with global ethics committees.
Currently, Meta works with the Washington, DC-based XR Association and the Metaverse Standards Forum. Both organisations aim to develop best practices for the global extended reality (XR) industry.
Meta also partnered with numerous global organisations to ethically develop the Metaverse along with a $50 million USD pledge.
Following poor revenues and high costs for its Reality Labs research and development (R&D) efforts, the embattled firm has significantly scaled back its metaverse funding. Meta also laid off roughly 11,000 employees across its operations in November last year, despite Apple pushing for new hires.
