Meta suffered a major defeat on Wednesday after EU regulators could severely curtail its Facebook and Instagram advertising business found that it had effectively coerced users into accepting personalized ads.

The decision, including a fine of 390 million euros ($414 million), requires Meta to make costly changes to its advertising-based business in the European Union, one of its biggest markets.

The decision is one of the most consequential since the bloc of 27 countries, home to some 450 million people, aimed to restrict the ability of Facebook and other companies to collect information about users without their prior consent. A landmark data-privacy law has been enacted. The law became effective in 2018.

The case depends on how Meta obtains legal permission from users to collect their data for personalized advertising. The company includes the language in its terms of service agreement, a very long statement that users must accept before accessing services like Facebook, Instagram and WhatsApp, effectively meaning that users will be allowed to use their data for personalized ads. or stop using Meta’s social media services. overall.

Ireland’s Data Privacy Board, which serves as Meta’s main regulator in the European Union because the company’s European headquarters are in Dublin, said EU authorities have determined that placing legal consent within the terms of service is essential. Users are forced to accept personalized ads, which violates known European law. as General Data Protection Regulation, or GDPR

The decision doesn’t specify how the company must comply with the ruling, but it could result in Meta allowing users to choose whether they want their data used for such targeted promotions.

If a large number of users choose not to share their data, it will cut out one of the most valuable parts of Meta’s business. Information about a user’s digital history – such as which videos on Instagram prompt a person to stop scrolling, or what types of links someone clicks while browsing their Facebook feed – is Used by marketers to get ads in front of people who are most likely to buy. practices helped Meta generate $118 billion in revenue 2021,

The fine against Meta contrasts with regulations in the United States, where there is no federal data privacy law and only a few states, such as California, have taken steps to enact rules similar to those in the European Union, but any changes made by Meta The resulting ruling could affect users in the United States; Many tech companies apply EU regulations globally because they are easier to enforce than to limit them to Europe.

The EU decision is the latest business headwind facing Meta, which was already battling a major drop in advertising revenue in 2021 due to a change Apple made that gave iPhone users the ability to choose whether advertisers can track them. Consumer surveys show that a majority of users have blocked tracking.

Meta’s struggles come as it is attempting to diversify its business from social media into the virtual reality world known as the Metaverse. The company’s share price has plunged more than 60 percent over the past year, and it has laid off thousands of employees.

Wednesday’s announcement relates to two complaints filed against Meta in 2018. Meta said it will appeal the decision, setting the stage for what could be a lengthy legal battle that will test the power of the GDPR and how aggressively the regulator will use the law to force companies to make their changes. business practice.

“We strongly believe that our approach respects the GDPR and therefore we are disappointed by these decisions,” Facebook said in a statement.

The result was praised by privacy groups as a long-awaited response to companies looking to grab as much data as possible about people online to deliver personalized ads. But the more than four years it took to reach a decision were also seen by critics as a sign that enforcement of the GDPR is weak and slow.

“European enforcement has not yet delivered on the promise of the GDPR,” said Jonny Ryan, a privacy rights activist who is a senior fellow at the Irish Council for Civil Liberties. The decision signals that “Big Tech could be in for a much bumpier ride.”

Within the European Union, there has been disagreement about how to implement the GDPR. Irish authorities said they initially decided that Meta’s permission to use the terms of service was sufficient to legally comply with the law. , but he was rejected by a board made up of representatives from all EU countries.

β€œThere has been a lack of regulatory clarity on this issue, and there is ongoing debate among regulators and policymakers as to which legal basis is most appropriate in a given situation,” Meta said in its statement.

There are few signs of an EU-wide, stepped-up effort to crack down on the world’s biggest tech companies. New EU laws were passed last year aimed at curbing anti-competitive practices in the tech industry and forcing social media companies to more aggressively police user-generated content on their platforms. Last month, Amazon agreed to make significant changes to the way it sells products on its platform as part of a settlement with EU regulators to avoid antitrust charges.

In November, Meta was fined roughly $275 million by Irish authorities for a data leak discovered last year that led to the personal information of more than 500 million Facebook users being published online.

In 2023, the European Court of Justice, the EU’s top court, is also expected to rule on cases that could lead to further changes to Meta’s data-collection practices.

Yet many believe enforcement does not match EU policymakers’ rhetoric about stronger tech regulation. Max Schrems, an Austrian data-protection activist whose nonprofit organization, NOYB, filed complaints in 2018 that led to Wednesday’s announcement, said there are thousands of data-protection complaints that still need to be addressed.

“On paper you have all these rights, but in reality the enforcement is not happening,” he said.

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