Meta suffered a significant defeat Wednesday that could seriously undercut its Facebook, Instagram advertising business. It was found by European Union regulators that Meta had illegally forced users into accepting personalized ads.

Meta could be forced to make expensive changes to its advertising-based business in Europe, which is one of its biggest markets, as a result of the decision.

This is the most important judgment since the 27-nation bloc which hosts approximately 450 million people enacted a landmark law on data privacy to limit the ability of Facebook and other companies to collect information about users without their consent. In 2018, the law was in effect.

Meta must obtain legal permission from users before they can collect their data to create personalized ads. Meta's terms of service agreement, which is a lengthy document that users must agree to in order to access services such as Facebook, Instagram, and WhatsApp, contains language that effectively states that users must either consent to their data being used for personalized advertising or discontinue using Meta's social media services.

E.U. stated that Ireland's data privacy Board, which acts as Meta's main regulator within the European Union, is located in Dublin. Authorities had found that users were forced to accept personalized ads by placing their legal consent in the terms of service. This violated the European law known for the General Data Protection Regulation (G.D.P.R).

Meta has three months to explain how it will comply. Although the decision doesn't specify what the company must do it could mean Meta allowing users to decide whether they wish their data to be used for targeted promotions.

Meta would lose one of its most valuable assets if a large number users chose not to share their data. Marketers can use information about a user's digital life to show ads to the people most likely to purchase. This includes what videos make a person stop scrolling on Instagram and what links they click when browsing Facebook feeds. These practices enabled Meta to generate $118 billion in revenue 2021.

According to Dan Ives (an analyst at Wedbush Security), the judgment could put at risk 5 to 7 percent to Meta's total advertising revenue. He said, "This could be an enormous gut punch."

Contrast this penalty with the regulations in the United States where there is no federal privacy law and only a handful of states such as California have made steps to establish rules similar to the ones in the European Union. Meta could make changes to its website as a result of this ruling. Many tech companies use E.U. Because it is easier to implement rules worldwide than to Europe,

The E.U. Meta is facing a new business problem with judgment. Meta was already struggling with a significant drop in advertising revenue due to a 2021 Apple change that allowed iPhone users to decide whether they want advertisers tracking them. Meta estimated that Apple's changes would result in a loss of $10 billion by 2022. Consumer surveys suggest that most users have blocked tracking.

Meta's problems arise as it tries to diversify its business, from social media to virtual reality worlds known as the metaverse. The stock price of the company has fallen more than 60% in the last year and it has laid off thousands employees .

Wednesday's announcement is about two 2018 complaints against Meta. Meta announced it would appeal the decision. This could lead to a long legal battle that will test the G.D.P.R.'s power. How aggressively regulators use law to force companies into changing their business practices.

Facebook stated in a statement that "We strongly believe that our approach respects G.D.P.R. and are therefore disappointed by these decisions."

Privacy groups hail the outcome as a timely response to companies grabbing as much information as they can online to deliver personalized ads. Critics also saw the four-year delay in reaching a decision as evidence that the G.D.P.R. was not being enforced. Slow and weak.

Johnny Ryan, a privacy rights activist and senior fellow at The Irish Council for Civil Liberties, stated that "European enforcement still has not delivered on the promise to the G.D.P.R." This judgment suggests that "Big Tech" may be in for a bumpier ride.

There has been some disagreement within the European Union about how to enforce G.D.P.R. Although the Irish authorities claimed that they initially believed Meta's use terms of service to obtain permission was legal enough to comply with the law as a matter of law, they were overruled by an E.U. board. countries.

Meta stated in its statement that there was a lack in regulatory clarity.

Helen Dixon, head of Ireland's Data Protection Commission said that regulators should be honest brokers and resist the demands privacy advocates make for unconstitutional rulings.

We won't get results by simply trying to rewrite G.D.P.R. "As we would like to have it written," Dixon stated in an interview.

The European Union is showing signs of a wider, more aggressive effort to crackdown on the largest tech companies in the world. New E.U. Last year, laws were passed to stop anticompetitive practices within the tech industry. They also required social media companies like Facebook and Twitter to enforce stricter policies regarding user-generated content. Amazon reached a settlement agreement with the E.U. last month and agreed to make significant changes in how products are sold through its platform. Antitrust cases will be avoided by regulators

Meta was fined by the Irish authorities in November for a data breach that resulted in the publication of personal information about more than 500 million Facebook users online.

The European Court of Justice is expected to rule in 2023 on cases that could result in more changes to Meta’s data-collection practices.

Many people believe that enforcement has not been consistent with the E.U. rhetoric. Policymakers need to be more strict about tech regulation. Max Schrems (an Austrian data protection activist whose non-profit organization, NOYB filed the 2018 complaints that led to Wednesday’s announcement), stated that thousands of data-protection concerns still need to be addressed.

He stated that although you may appear to have all the rights, enforcement is not actually happening.
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