The Standoff Between Meta and the EU Raises Questions on Governing the Digital Economy

In a bold move, Meta, formerly known as Facebook, decided to keep its social media app, Threads, out of the EU market, while British consumers flocked to the platform. This decision carries significant implications for both tech companies and regulators, raising deeper questions about who governs today’s digital economy.

Meta’s practice of sharing data across its platforms, including importing data from Instagram to Threads, may potentially violate the EU’s strict data privacy and competition rules, such as the Digital Markets Act. The absence of similar regulatory requirements in the UK has allowed Threads to operate freely, suggesting that the EU’s regulatory superpower status might come at a cost.

However, this Brexit dividend for Meta may not be sustainable. The EU’s ability to achieve global compliance through market regulation, known as the ‘Brussels Effect,’ has compelled leading US tech companies to comply with strict antitrust, data privacy, and content moderation rules in the past. Even Meta’s threats to withdraw services from the EU were later clarified, demonstrating the challenges of resisting EU regulations.

Other tech giants, including Google, have also adapted their products to comply with EU regulations, reinforcing the EU’s regulatory agenda. For Meta, forgoing the lucrative EU market would be costly, as alternatives like China are restricted local censorship rules and developing markets like India offer lower advertising revenue.

It’s not just the EU that seeks to rein in tech companies. Digital regulations are emerging worldwide, with countries like Australia, Brazil, Canada, and South Korea adopting European-inspired digital regulations. This further limits expansion opportunities for tech companies outside the EU.

Meta’s decision to delay introducing Threads in the EU can potentially serve as an effective lobing strategy. It strengthens factions in Brussels that question the EU’s ambitious regulatory stance, potentially prompting a reconsideration of EU regulations.

The standoff between Meta’s Threads and EU regulations extends beyond business decisions. It raises fundamental questions about the governance of the digital economy. Tech companies, with their size and societal influence, are becoming significant power players in a “technopolar” world. However, governments still retain coercive force and regulatory authority over these companies.

Tech companies cannot pass government regulations, refuse to pay digital taxes, or ignore content takedown orders. Their power is limited to not operating in jurisdictions with undesirable laws, which comes at a significant cost.

The clash between Threads and EU regulations will determine whether Meta or the European regulators will relent. The outcome will reveal the limits and costs of regulatory authority in the digital economy. While Meta may try to extract concessions during this standoff, it is too early to declare winners or write off the EU regulators.

Source: Anu Bradford, Henry L. Moses Professor of Law and International Organizations, Columbia Law School. (No URL provided)