In an unexpected ruling, the European Union's highest court ordered Meta's Facebook to get user authorization before distributing customized advertisements in specific circumstances.
Meta's long-running legal struggle to maintain its primary business model, which is targeted ads, may be complicated by the EU Court of Justice's judgment on Tuesday, July 4.
Facebook May Require Users to Opt-in Ads
In a report by the Wall Street Journal, Facebook may have to ask users to opt into advertisements based on how they use it and other Meta applications, depending on how widely the judgment is construed. Examples of these interactions include users commenting on Instagram posts or watching a certain Instagram video.
Meta sells customized adverts to its users based on their digital activities. Therefore, this ruling would hurt its revenue.
Notably, Meta earned $28 billion in advertising revenue in the three months ending March 31, 22% of which came from Europe.
The decision made on Tuesday would only be binding inside the EU only. But it might create a precedent for other social media sites that utilize the same EU privacy regulations to explain their suited ads and may now require user approval throughout the union.
Meta is contesting a $425 million EU punishment for forcing users of Facebook, Instagram, and WhatsApp to accept personalized ads to access those services, as reported by Engadget. Tuesday's Court of Justice verdict is not appealable and may affect Meta's case in Ireland.
After January's Irish privacy assessment, Meta changed its legal basis for displaying such ads under the EU's privacy legislation to the "legitimate interest" of its company and launched an online form for EU-based users to opt out of personalized ads. Privacy campaigners, who wanted the business to ask all European users to opt into using their activity data for adverts, were furious.
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Facebook's "Legitimate Interest" vs. User Privacy Concerns
In Tuesday's verdict, the Luxembourg court ruled that users' privacy interests outweigh Facebook's "legitimate interest" in personalizing adverts.
Facebook's free business model is cited as the reason why users should not expect that their data would be used in any way that could be considered personally identifiable without their knowledge and permission.
By definition, under EU legislation, consent cannot be made a condition of service access unless the user actively chooses to do so.
The court said Meta's internet surveillance is particularly extensive and might give users "the feeling that his or her private life is being continuously monitored."
A representative for Meta said the company is reviewing the court's ruling and would provide more comment at a later time.
The decision is part of a bigger court decision that says local competition officials, like Germany's Federal Cartel Office, can look at how well other laws are followed when looking into trade cases. Rule breaching in one area may indicate anti-competitive activity in other areas.
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