Why Facebook Is Running Afoul of International Business Regulators

Facebook is popular and its global user base is growing, but there seems to be no love lost between the social network and regulators around the world.

Facebook is in the middle of a major spat in Brazil. Diego Dzodan, the company’s vice president of Latin America, was detained for a day after repeated attempts by Brazilian law-enforcement officials to obtain WhatsApp chat records related to an ongoing drug-trafficking investigation. Facebook has said repeatedly that it does not have access to chat records due to WhatsApp’s end-to-end encryption. Facebook asserts that it respects user privacy and will not turn over a key to unlock any data. Unsurprisingly, the stance hasn’t won Facebook any friends in Brazil.

Facebook has been banned in China since 2008. The Chinese government, which heavily censors Internet content, has claimed that blocking Facebook is in the public’s best interest. In reality, Facebook represents an opportunity for Chinese users to freely express themselves, which is discouraged in China. Unless Facebook wants to censor content—something it has said it will not do—it will remain blocked in China indefinitely.

Germany has become the latest thorn in Facebook CEO Mark Zuckerberg’s side. The German Federal Cartel Office (FCO) announced March 2 that it’s investigating Facebook to determine whether it’s unfairly using its “dominant” position in the social media marketplace to violate data protection and competition laws across Germany. If Facebook is found guilty, it could face stiff fines and the possibility of being ordered to change some of its data-retention and analysis techniques. However, a ruling in the case is still months away.

Belgium has raised its own data-privacy issues with Facebook. In November, Facebook lost a case brought by a privacy watchdog in Belgium for allegedly using cookies to track non-users who just looked at the site’s content. The court ruled the maneuver—tracking a non-user who didn’t consent to being tracked—was in violation of Belgian law. Facebook, which said it would appeal the ruling, ultimately decided to bow to Belgian pressure. The company now requires everyone to log into their Facebook accounts to see user content.

Around the world, Facebook is being asked to prove it’s competing fairly with other foreign and domestic Internet companies. In fact, the case in Germany specifically says that Facebook’s dominance in social networking gives it access to massive amounts of user data that it can employ to enhance its advertising platform and thus generate more revenue. Other countries have made similar arguments. They all say Facebook is competing with few other companies for digital advertising dollars and its access to more than a billion users’ data is the secret sauce that helps it succeed—and keep competitors down. Unsurprisingly, Facebook disagrees.

Like Microsoft, Google, Apple and others, Facebook is a victim of its own success. In fact, regulatory authorities around the world are targeting Facebook in part because it’s so big. In an interview with The Wall Street Journal last year, an official with France’s privacy regulator, the CNIL, said that it was “time to focus on Facebook.” The reason: The CNIL wants to target big U.S.-based companies over alleged privacy violations. Twitter and other Internet companies have largely remained unscathed internationally, and Facebook is facing trouble at every turn because it’s the biggest target.

India and Facebook spent months battling over whether the Free Basics Internet service is legal. The country’s regulators ultimately struck down Free Basics, which is backed by Facebook, over claims that it violates net neutrality laws. Free Basics is under similar scrutiny in other countries, due in large part to Facebook’s acting as the ultimate arbiter of what apps will work with it and what will not. Facebook contends that some Internet service is better than none. But critics in emerging markets around the world say Free Basics may ultimately enrich Facebook at the expense of its competition.

In Europe, Facebook has used its headquarters in Ireland as a defense against other countries. The company says that no other country but Ireland has jurisdiction on its business. Facebook adds that Ireland’s privacy regulator conducts ongoing audits. That regulator told The Wall Street Journal last year that it has “frequent and ongoing contact with Facebook” and has requested privacy changes that affect all Europeans positively. Officials from other countries, however, don’t believe that those audits or Facebook’s jurisdiction argument hold any water.

In nearly every country where Facebook has faced scrutiny, the question of who should own data—and how it should be used—has come up. In fact, one could argue that the issue of data privacy is the common thread across all of Facebook’s cases. Critics say Facebook should not own user data, adding that the company’s use of that data to make connections between users and ads is a privacy violation. The number of regulators examining the issue of data ownership is on the rise. In the next few years Facebook will have to contend with multiple legal actions and regulatory orders involving user data privacy and ownership.

In addition to saying that it’s innocent of any wrongdoing, Facebook has also made a show of improving user privacy. Over the past couple of years, Facebook has continually updated its privacy settings to make them easier to modify and for users to select what content can be shared and what may not. Facebook asserts these moves adequately safeguard user data and will certainly use this to defend itself in current and future international cases.