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Facebook says EU's privacy investigations hurt innovation, economy

The social network's head of public policy in Europe says changes to how regulations are handled there could prompt Facebook to stop bringing new features to its service.

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Facebook is firing back in its battle with EU regulators. CNET

The world's largest social network has a message for the European Union: stay the course or risk hurting our users.

In a lengthy editorial published Wednesday, Facebook's vice president of public policy in Europe, Richard Allan, issued a retort to European regulators who have started investigations into the company's privacy practices. Allan argues that the many countries now investigating Facebook are undermining European law and could ultimately hurt both Facebook's users and smaller Internet companies trying to become the next Facebook.

"National regulation would pose serious obstacles," Allan wrote. "Facebook's costs would increase, and people in Europe would notice new features arriving more slowly, or not at all. The biggest victims would be smaller European companies. The next big thing might never see the light of day."

Some EU countries are at odds with Facebook -- which has 1.4 billion users worldwide, including 83 percent active outside the US and Canada -- over how regulations should be handled in the euro zone. Earlier this month, privacy regulators in France, Spain, Italy and elsewhere launched probes into how Facebook collects user data. They're most interested in how Facebook combines its own information with that from the other companies it owns, like photo-sharing service Instagram, as well as how it tracks people after they have used Facebook's "like" button.

If the investigations move forward and Facebook is found to be violating privacy laws within those countries, the company could face millions of euros in fines and be forced to modify how it operates in the specified countries.

Facebook, which has its European headquarters in Ireland, has said that individual EU countries do not have the right to investigate just any business as part of EU law. Facebook said earlier this month that companies can be monitored only by regulators based where their headquarters are located. As soon as regulators within that country allow a firm to operate and determine that it's in compliance with EU law, the firm can offer its product or service anywhere in the EU.

"Initially, when the authorities in other countries had concerns about our services, they worked with the Irish regulator to resolve them," Allan wrote in today's editorial. "This is how European regulation is supposed to work: if a business meets regulations implemented in its home country, it can operate across the EU."

Allan, on behalf of Facebook, argues that such a law makes sense. If individual countries are allowed to determine their own regulatory standards, the euro zone is essentially broken and common laws ousted. Companies, meanwhile, will need to take on the expensive task of adhering to different country laws and in the process, he says, it's the average consumer who suffers.

"Consumers would not be as well served; the cost of selling in a new market would increase, and some companies would not bother," he wrote. "Common rules have given Europe's workers prosperity and its consumers choice."

European regulators, however, have grown impatient with such edicts. Though the EU is made up of member countries, they all have their own laws on privacy, and interpretations of what it is. Therefore, the countries believe they should have some say in how companies operate, even if those firms are based in another country.

In February, Belgium enlisted the help of two organizations that are part of the government's iMinds digital research center to investigate updates to the social network's terms of service. The resulting report indicated that " Facebook is acting in violation of European law" -- a charge Facebook denied, citing Ireland's own regulatory interpretation.

"We're confident the updates comply with applicable laws," a company spokesperson said. "As a company with international headquarters in Dublin, we routinely review product and policy updates, ­ including this one, with our regulator, the Irish Data Protection Commissioner, who oversees our compliance with the EU Data Protection Directive as implemented under Irish law."

It's unlikely that the differences in opinion will be resolved soon, if at all. However, Allan argues that rather than target Facebook and publicly air differences over how it operates, regulators across the EU should "work together" to find common ground.

"That is surely a better approach than to fragment Europe's single market, and waste resources mounting independent investigations into issues that have already been thoroughly examined," he wrote.

But trying to change opinions in Europe isn't necessarily easy for technology companies. Google learned that lesson earlier this month after the EU's competition commissioner, Margrethe Vestager, accused Google of abusing its search dominance to hurt competition across Europe. Google had been working with the EU for years to sidestep the action, which could result in the company getting hit with fines of up to $6.6 billion.

Facebook declined to provide additional comment.