Facebook Says Regulator Data Transfer Ruling Will Kill Its EU Operations

Facebook Inc FB is unsure if it can continue to run its social media platforms in the European Union if a new Ireland data protection ruling comes into effect.

What Happened: The Mark Zuckerberg-led company told Ireland’s High Court that if a ruling by the country’s Data Protection Commission in regard to its data transfer mechanism isn't blocked, Facebook and subsidiary Instagram's operations would be severely impacted, Reuters reported Sunday — citing local media.

DPC gave a preliminary ruling earlier that Standard Contractual Clauses (SCCs), the mechanism used by Facebook to transfer data between the EU and the U.S. “cannot in practice be used,” according to Reuters.

“It is not clear to [Facebook] how, in those circumstances, it could continue to provide the Facebook and Instagram services in the EU,” the company reportedly said in an affidavit filed to the court.

The ruling was issued based on EU concerns that the privacy rights of its citizens may not be respected in the U.S., where the data of its citizens is sent for commercial use and is subject to the U.S. surveillance regime, Reuters noted.

Facebook secured a temporary halt on the EU regulator’s order from the court, which will consider the matter in November, as per Reuters.

Why It Matters: On July 16, the Court of Justice of the European Union invalidated Privacy Shield, a mechanism the Mark Zuckerberg-led company used for transatlantic data transfers from European Economic Area to the U.S., according to Facebook.

The alternative mechanism for data transfer, SCCs, remains valid, as per the social media giant.

Facebook confirmed that a ban on SCCs would have a “far reaching effect on businesses” that use such mechanisms, Reuters reported.

Price Action: Facebook shares closed 0.9% lower at $252.53 on Friday.