Meta Platforms Inc (Nasdaq: META) came under selling pressure on Tuesday after news reports indicated that the social media platform provider was slapped with a record fine of €1.20 billion by the European privacy watchdog over the relocation of EU user information to the US. Furthermore, the Irish Data Protection Commission has also directed Meta to terminate the transfer of personal data pertaining to the EU to the US.
Meta intends to submit a petition to review the data transfer restriction order and the fine. The stock closed Tuesday’s trading session at $246.74, down $1.58 or 0.64% from its prior close.
The Irish regulator, the Irish Data Protection Commission, monitoring Menlo Park, California-based Meta’s activities in the European Union, accused the company of breaching the General Data Protection Regulation after discovering it was transferring personal information of EU citizens to the US despite the restraining decree issued by the European Court in 2020. The EU’s historic data protection regulation that monitors companies that are active in the region, is called GDPR. The regulation became effective in 2018.
Through the use of standard contractual provisions, Meta carried out cross-border transfers of personal data. This provision was not restricted by any of the EU courts. The Irish regulator stated that the provisions were embraced by the European Commission, the executive division of the EU, in concurrence with steps enforced by Meta. Nevertheless, as per the regulator, these measures failed to resolve the issues related to the fundamental rights and freedoms of data detected by the European Court of Justice.
Therefore, based on the aforesaid facts, the Irish regulator directed Meta to pay a fine of €1.20 billion. Ireland’s regulator also gave a time period of five months for Meta to terminate any future transfer of customer data to the US.
The ruling was made against the backdrop of a case put forth by an Austrian advocate for privacy, Max Schrems, who contended that the system for shifting information pertaining to EU citizens did not safeguard Europeans from US surveillance. Multiple procedures to formally transfer personal information between the EU and the US have been challenged. One such recent agreement, named Privacy Shield, was nullified by the European Court of Justice (highest legal authority of the European Union), three years ago.
The €1.20 billion fine on Meta is the highest on record for violating GDPR by any enterprise. The previous largest penalty of €746 million was slapped on Amazon for breaching GDPR in 2021. Meta’s spokesperson has stated that the firm will submit a review petition.
Specifically, Jennifer Newstead, chief legal officer, and Nick Clegg, president of global affairs, stated that the company will immediately appeal for a stay order against the aforesaid decree as it would cause considerable damage to the millions of Facebook customers.
The Meta issue has drawn attention to the US and EU’s efforts to establish a fresh data transfer regulation. Last year, the EU and the US agreed in principle to create a new legal framework for data transfers across borders. Nevertheless, the latest agreement has yet to become effective.
Meta hopes that the EU-US data privacy deal comes into force before the Irish watchdog’s timelines are imposed.
In this regard, Clegg and Newstead pointed out that the enforcement of the new guidelines will enable the company to carry on with its operations as usual without implementing any kind of change or impacting customers.
The news of the penalty is expected to keep the stock of Meta range bound in the short term.
The historical price chart indicates that the stock of Meta is facing resistance at 250. The next major support is anticipated to be near 225. Additionally, the stochastic oscillator is in the overbought region. Therefore, we anticipate the stock of Meta to remain in a downtrend in the days ahead.
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