Is Facebook leaving Europe? The dance of online data and privacy

A few months ago a piece of news echoed through the different media in Europe. Facebook, now known as Meta, and led by its CEO Mark Zuckerberg, threatened to leave Europa by closing most of its services (including the famous Instagram platform). Although the population, in general, considered a risk that this technological giant would leave the European market, for the most expert, this statement was considered a very unbelievable threat.

But, what are the reasons why a company with a strong base in the development of artificial intelligence can consider leaving the European market?

The main reason is economical and is related to how companies can monetize the oil of the 21st century, that is, user data.

The monetization of data by companies is carried out in two main ways: i) internally, allowing to improve operations, productivity, products, or services, and ii) externally, selling the data or making the data available to customers or partners.

It is important to remind readers that the usage of different platforms and the enjoyment of millions of free online content carries a "price": your personal information or private data. The progress of information technology and the Internet makes the scope and extent of data that can be stored grow considerably. Therefore, the existence of a data market is a reality. It is through data mining that is possible to identify structures and patterns within massive amounts of data, such as purchasing habits, which allows companies to generate significant economic benefits. Moreover, this set of activities has given rise to questions related to privacy and security.

The right to privacy: do we have control over our personal information?

The answer to this question may not be trivial. The users, providers of private information, cannot participate in the negotiation table on the transfer of that data.

Today, privacy and the way we understand it are evolving concepts. Therefore, giving a concrete and exact definition of privacy is a complex task. Given this problem, the right to privacy and how organizations try to deal with its regulation may not be the same in different places worldwide. That is the problem: there is no standard definition that allows harmonizing efforts to guarantee the right to privacy at a global level. Hence, there are different operating laws in the world. Therefore, this affects companies like Facebook, which is already globally present through online commerce and has access to millions of personal data. These companies are affected by different national laws that try to guarantee users' privacy.

These legislations present different ways of protecting private data and, therefore, affect how companies can monetize it.

These laws change the way to protect private data in each territory. Therefore, this fact affects how companies can monetize data in each part of the world, precisely attending to the particularities of the operating standard.

Operating frameworks regarding privacy 

Currently, there are different regulatory frameworks for the protection of personal data. There are three crucial pieces of legislation at the international level: the ones operating in the USA, China, and Europe. That is so due to the weight they have in the global economy. The General Data Protection Regulation (RGPD) operating in the EU, regulations in the different US states (such as the California Consumer Privacy Act), and the Chinese Cyber ​​Security Law. The three pieces of legislation present points of concurrence but also divergence. Also, each of them presents a problem. For example, the regulation of data in the US is a competence delegated to the different states, resulting in each one having its legislation for data protection. Furthermore, before the arrival of the European GDPR, the transfer of data between the US and the EU was regulated by the Privacy Shield, an agreement signed in 2016 between the US and the European Union that established a primitive framework for data protection. However, the entry into force of European legislation meant abandoning this rule. As a result, globalized companies like Facebook have found themselves with a much more advanced and less permissive standard, making it difficult to transfer data and suffering unprecedented losses. That is what led Facebook to consider leaving the European market.

We could say that the different regulations do not unanimously advance data rights. In addition, the standards differ in how they operate. 

Figure 1 presents the three main legal frameworks mentioned above and their progress regarding data rights.

Figure 1: Main legal frameworks

In the opt-in policy adopted by the European standard, firms first have to obtain consumers' consent. However, with the opt-out policy adopted by the American states, it is the concerned consumers who have to act to withdraw their information. In other words, the users of the websites are the ones who have to look for the privacy option and mark their preferences, being a more expensive task and carried out at the end of the interaction. Finally, the Chinese regulation seems to position as a standard of intermediate hardness.

In an operational way: would it be possible to reach a harmonization and global consensus of policies?

The problem of not having a common and international standard is the lack of operability for increasingly globalized companies. International trade has evolved thanks to the possibility of online sales, hence the importance of the digital economy and digital markets. Cybercrime, digital piracy, and data leakage are examples of the necessity for a unique international law and standardization of privacy, which can guarantee the future of digital markets. If firms operate worldwide, they are affected by different regulations making mere survival difficult and forcing them to adapt their business constantly. Therefore, to what extent are we willing to sacrifice our privacy to continue enjoying online services like Facebook or Instagram?

If the reader wants to delve a little more into the history of the notion of privacy, digital markets, and their regulation, I invite you to read my recent publication in the Journal of Economic Issues of the Association for Evolutionary Economics, entitled: A General Approach on Privacy and its Implications in the Digital Economy, at the following link: https://doi.org/10.1080/00213624.2022.2025729

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This article was sent by Mariola Sánchez. Mariola holds a Ph.D. in Industrial Economics from the University of Valencia (UV). Her main areas of research focus on industrial organization and aspects related to market regulation and competition. In 2015, she got a 4-year pre-doctoral contract for the training of research personnel (FPI) from the Ministry of Economy and Competitiveness in Spain. During her doctoral period, she made an international stay at Brown University (USA). In 2019 she earns her doctoral degree with international mentions and Cum Laude. Her thesis was awarded the Enrique Fuentes Quintana Prize in Social Sciences call 2019-2020. Currently, she is a postdoctoral researcher at the Miguel Hernández University of Elche.