On Wednesday, January 4, European Union regulators decided that Facebook and Instagram, both properties of Meta Platforms (META), had illegally forced users to accept personalized ads.
The fine of 390 million euros ($314 million) isn’t by any means the most damaging part of the decision. The company could be forced to make costly changes to its advertising-based business in the European Union, one of its largest markets and home to 450 million people. And the company could either be forced by regulators in other countries or decide to make the changes on its own to its global business that would turn the European Union decision into a defacto global standard.
The ruling against Meta Platforms is the latest fallout from the landmark data-privacy law in the European Union, which took effect in 2018, aimed at restricting the ability of Facebook and other companies to collect information about users without their prior consent. The law took effect in 2018.
The company now buries legal permission from users to collect their data for personalized advertising in its very long terms-of-service agreement. European Union regulators found that since users are forced to accept the user service agreement in order to use Facebook, Instagram, and WhatsApp without ever seeing or understanding that they had signed away their data privacy rights, the practice amounts to illegally forcing users to accept Meta Platform’s use of their data to track a user’s digital history. Meta has three months to outline how it will comply with the ruling. The decision does not specify what the company must do, but it could result in Meta’s allowing users to choose whether they want their data used for such targeted promotions.
The judgment puts 5% to 7% of Meta’s overall advertising revenue at risk, according to Dan Ives, an analyst at Wedbush Securities, the New York Times reports.
Meta Platforms collects information about a user’s digital history—-what types of links a person clicks when browsing Facebook feeds, for example—- that marketers use to get ads in front of people who are the most likely to buy.
In November, Meta was fined roughly $275 million by the 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 is expected to rule on cases that could lead to more changes to Meta’s data-collection practices.
Meta is already seeing a major drop in advertising revenue because of a change made by Apple in 2021 that gave iPhone users the ability to choose whether advertisers could track them. Meta said last year that Apple’s changes would cost it about $10 billion in 2022. Consumer surveys suggest that a clear majority of users have blocked tracking.
Meta Platforms shares are down 63.15% over the last 12 months.