Millionaire fines put Meta’s economic model in Europe to the test

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The economic model of the American giant Meta, owner of Facebook, faces a tough test in the European Union (EU), after a new multimillion fine from the Irish regulator.

Meta is targeted for its controversial handling of its users’ personal data and the way it is used for targeted advertising.

The Irish regulator fined Meta twice on Wednesday (4th) by €390 million ($410 million).

The Irish Data Protection Commission (DPC) alleged that Meta breached “its transparency obligations” and used an erroneous legal basis “for the processing of personal data for the purposes of personalized advertising”.

This decision “could represent a hard blow for Meta”, anticipates Dan Ives, an analyst at the American investment company Wedbush Securities, who estimates that the group could lose between 5% and 7% of its turnover in the medium term.

Meta has announced that it will appeal, which gives room “to delay the deadlines” while it evaluates the course to take, adds this expert.

Europe represents a key market for Meta.

Facebook had 303 million daily active users in Europe in Q3 2022, compared to 197 million in the US/Canada region, out of a total of 2 billion worldwide.

And the European market accounted for around 21% of Meta’s advertising turnover over the same period (47% for the US/Canada area).

According to legal experts, the Irish regulator’s decision obliges the American giant to ask its European users for specific authorization to offer them targeted advertising.

Targeted advertising, theoretically selected based on user tastes, has been a key element of the big players on the Internet and social networks for years.

Non-selective advertising means less revenue for companies.

“There is no other possible solution than asking for formal consent” from Internet users, explains Paul-Olivier Gibert, president of the French Association of Personal Data Controllers.

Lawyer Sonia Cissé, from the Linklater office, considers that the Irish decision “does not jeopardize economic models” based on targeted advertising, as is the case with Meta.

“But it clearly regulates and limits them,” he insists.

To entice users to agree to consent, “companies will need to be more spirited,” he predicts.

Benevolence

The Meta can at least count on some Irish benevolence.

The agency acknowledged that it only sanctioned the group after receiving pressure from its European counterparts, gathered in the European Data Protection Committee.

The DPC, at the same time, declined to open an investigation into the pool of data collected by Facebook and Meta.

“Right now there are a lot of sanctions against American companies,” says Cissé, an expert in lawsuits related to personal data.

“European regulatory authorities are very attentive to protecting the interests of users” of the platforms, but “sometimes I wonder if it is not a way of favoring European companies”, he adds.

“Users like to receive free services that, for now, European companies have not been able to offer”, he points out.

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