Meta & Facebook face massive legal setback at top EU court over user privacy and ads

Facebook and Meta suffered a massive legal setback when the highest court of the European Union ruled against it in a significant German antitrust case. The decision imposed restrictions on how Facebook utilizes data for advertising purposes.

According to the European Court of Justice, competition regulators have the authority to assess whether companies like Facebook adhere to Europe’s stringent privacy regulations, typically enforced by national data protection authorities.

The court, headquartered in Luxembourg, determined that antitrust agencies can take violations of data privacy regulations into account while investigating the potential abuse of market dominance by tech giants that may be suppressing competition.

Meta, the parent company of Facebook, responded to the ruling by stating that they are analyzing the court’s decision and will provide further comments in due course.

The court upheld a 2019 German antitrust ruling that posed a significant threat to Meta’s business model, which involves selling targeted ads based on user data collected from their activities on its platforms, including Instagram and WhatsApp.

Meta, the parent company of Facebook, had appealed against the German ruling, prompting German authorities to seek the Court of Justice’s opinion, the highest tribunal of the European Union.

The court’s decision on Tuesday could lead to increased scrutiny of technology companies. Europe has been at the forefront of efforts to regulate the power of major digital platforms, with comprehensive new standards set to come into effect next month and ongoing work on regulations regarding artificial intelligence.

The German Federal Cartel Office, also known as the Bundeskartellamt, did not object to Facebook using customer data to target ads on its own platform. However, it argued that in order for Facebook to combine data from all its services to enhance ad targeting accuracy, the company should obtain separate permission from the respective apps and websites.

The main concern revolves around how Facebook obtains user consent for data processing.

According to a press release summarizing the court’s ruling, Facebook is unable to justify its use of personal data to deliver targeted ads to users by claiming a “legitimate interest.” In accordance with European Union privacy regulations, users must provide explicit consent for their data to be utilized.

Andreas Mundt, the president of the German Federal Cartel Office, stated that the EU court’s decision will have significant implications for the business models of companies operating in the data economy, indicating that the ruling will have far-reaching effects.

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