Filings with the U.S. Securities and Exchange Commission show Meta is preparing for a stop on its EU-U.S. data flows and a EU General Data Protection Regulation fine. The company's Q1 2023 Form Q-10 and Q1 2023 earnings report explained to investors the impacts of the imminent final decision from Ireland's Data Protection Commission on the legality of its EU-U.S. transfers.
The DPC order, expected to be formally published by 12 May, could force a halt to Meta’s EU operations if an adequacy decision via the proposed EU-U.S. Data Privacy Framework is not granted before the order takes effect. Additionally, Meta is planning for a potentially steep monetary fine and corrective measures from the DPC after recommendations from the European Data Protection Board.
"We expect the Irish Data Protection Commission to issue a decision in May in its previously disclosed inquiry relating to transatlantic data transfers of Facebook EU/EEA user data, including a suspension order for such transfers and a fine," Meta explained in its earnings report.
In the Q-10 filing, Meta added the fine could be "substantial" and it expects the DPC order to require the company "to bring its relevant processing operations into compliance with the GDPR." Disclosures also explained the potential road ahead after the DPC's decision is finalized.
"We expect that the deadlines to comply with the (DPC) decision will be no earlier than the fourth quarter of 2023," Meta wrote. "Once the final decision is issued, we will have an opportunity to appeal and seek a stay."
IAPP Vice President and Chief Knowledge Officer Caitlin Fennessy, CIPP/US, said the expected stop transfers order and any yet-to-be-announced corrective measures could prove more meaningful than even a record penalty, noting curtailed data flows and subsequent change in data-driven business model "could have even larger financial implications for Meta and thousands of other companies."
A new data transfer mechanism to replace the EU-U.S. Privacy Shield Framework remains the top solution for Meta's transfer woes.
The timeline for finalization of a new mechanism remains undetermined as the European Commission works toward the final adequacy decision with the U.S. under the proposed EU-U.S. DPF. European Commissioner for Justice Didier Reynders
In the wider scope of the looming order, Fennessy said, "This could lead EU businesses to demand data localization from U.S. business partners or to switch to domestic alternatives. Such shifts could well outlast the adequacy process. Privacy professionals across sectors should prepare their CEOs and boards for significant data transfer disruptions in the months to come."
Case origins
In July 2020, the Court of Justice of the European Union
Meta's legal challenges to the DPC's inquiry were responded by claiming its Facebook and Instagram operations in the EU may be shuttered pending the final decision and the timeline for a Privacy Shield replacement.
Delivery of the decision to DPAs triggered two EU General Data Protection Regulation-mandated processes concerning the European Data Protection Board. The EDPB first took up an Article 60 process that provided DPAs a month to deliberate, comment, or express "relevant or reasoned objection," on the DPC's draft decision. Objections were made, forcing an binding Article 65 decision issued 13 April resolved data protection authorities' differences on "whether an administrative fine and/or an additional order to bring processing into compliance must be included in the Irish DPA’s final decision."
The DPC has one month to adopt its final decision based on the EDPB's opinion and legal analysis. Irish Data Protection Commissioner Helen Dixon recently said
