Meta, formerly Facebook, warned that it might be forced to pull out its social media platforms in Europe if it is unable to find ways to adjust to the region's regulations. The company said in its annual report to the U.S. Securities and Exchange Commission that it could not operate in Europe if it was not allowed to transfer user data to its servers in the U.S.
The company said that Europe's evolving laws and regulations are negatively impacting its critical operation. The social media giant specifically cited a decision made by the Court of Justice of the European Union involving the bloc's Private Shield agreement.
Private Shield would have allowed for the development of a framework to transfer user data to and from the U.S. and the E.U. However, the court ruled in favor of invalidating the agreement. Meta currently relies on the Standard Contractual Clauses to transfer data to its servers, but the company said it might soon be subject to added regulatory scrutiny.
Meta said it recently received a preliminary draft decision from the Irish Data Protection Commission, which warned that its reliance on the Standard Contractual Clauses might be in violation of the European Union's General Data Protection Regulation.
The company said that when the time comes that it will no longer be able to transfer data to its U.S. servers, it may be forced to pull out a number of its social media products - including Facebook and Instagram. The company said such an occurrence would adversely affect its operations, finances, and overall business in the region.
If there is no resolution that can be found, people living in Europe could soon lose their access to both Instagram and Facebook. Meta said that being able to collate and share data is crucial to the continued operations of its advertising and services business.
Meta said stricter data privacy regulations, like the California Consumer Privacy Act, which gives users new data privacy rights, restricts how it can use sensitive personal data, and gives users more discretion over how their data is used with third parties, may affect its ability to do business.
The new rules and regulations, according to Meta, might result in unfavorable consequences, impede the development of new products, and cause it to change or stop its current business activities.
Following the news of its assessment in its annual report, Meta's stock price plunged by nearly 27%. The drop wiped out more than $250 billion from the company's market valuation. Mark Zuckerberg's net worth plummeted by more than $43 billion following the dip.
