Facebook stop most users who could benefit from new data regulations from getting them, site confirms

The site says the decision will not matter to users since they will be protected anyway

Facebook co-founder, Chairman and CEO Mark Zuckerberg testifies before the House Energy and Commerce Committee in the Rayburn House Office Building on Capitol Hill April 11, 2018 in Washington, DC (Getty)

Facebook is changing its business so that its users will not be covered by new privacy protections.

The new GDPR protections, which will roll out next month, would apply to some 1.9 billion Facebook users if they went into effect now. But the site is moving its businesses around to ensure that the real number will be far smaller.

Facebook users who are not in the US or Canada are currently held under terms of service run by its international headquarters, which are in Ireland. That means that the those users should also be protected by the GDPR rules, too – since they apply to anyone whose data is being collected by a European company, even if they are not in Europe themselves.

But next month Facebook will argue that only its European users will be covered by the new protections, which force Facebook to give people more power over their own data. The 1.5 million users in Africa, Asia, Australia and Latin America won't benefit from the new protections, they will say.

The previously unreported move, which Facebook confirmed to Reuters on Tuesday, shows the world's largest online social network is keen to reduce its exposure to GDPR, which allows European regulators to fine companies for collecting or using personal data without users' consent.

That removes a huge potential liability for Facebook, as the new EU law allows for fines of up to 4 percent of global annual revenue for infractions, which in Facebook's case could mean billions of dollars.

The change comes as Facebook is under scrutiny from regulators and lawmakers around the world since disclosing last month that the personal information of millions of users wrongly ended up in the hands of political consultancy Cambridge Analytica, setting off wider concerns about how it handles user data.

The change affects more than 70 percent of Facebook's 2 billion-plus members. As of December, Facebook had 239 million users in the United States and Canada, 370 million in Europe and 1.52 billion users elsewhere.

Facebook, like many other U.S. technology companies, established an Irish subsidiary in 2008 and took advantage of the country's low corporate tax rates, routing through it revenue from some advertisers outside North America. The unit is subject to regulations applied by the 28-nation European Union.

Facebook said the latest change does not have tax implications.

In a statement given to Reuters, Facebook played down the importance of the terms of service change, saying it plans to make the privacy controls and settings that Europe will get under GDPR available to the rest of the world.

"We apply the same privacy protections everywhere, regardless of whether your agreement is with Facebook Inc or Facebook Ireland," the company said.

Earlier this month, Facebook Chief Executive Mark Zuckerberg told Reuters in an interview that his company would apply the EU law globally "in spirit," but stopped short of committing to it as the standard for the social network across the world.

In practice, the change means the 1.5 billion affected users will not be able to file complaints with Ireland's Data Protection Commissioner or in Irish courts. Instead they will be governed by more lenient U.S. privacy laws, said Michael Veale, a technology policy researcher at University College London.

Facebook will have more leeway in how it handles data about those users, Veale said. Certain types of data such as browsing history, for instance, are considered personal data under EU law but are not as protected in the United States, he said.

The company said its rationale for the change was related to the European Union's mandated privacy notices, "because EU law requires specific language." For example, the company said, the new EU law requires specific legal terminology about the legal basis for processing data which does not exist in U.S. law.

Ireland was unaware of the change. One Irish official, speaking on condition of anonymity, said he did not know of any plans by Facebook to transfer responsibilities wholesale to the United States or to decrease Facebook's presence in Ireland, where the social network is seeking to recruit more than 100 new staff.

Facebook released a revised terms of service in draft form two weeks ago, and they are scheduled to take effect next month.

Other multinational companies are also planning changes. LinkedIn, a unit of Microsoft Corp, tells users in its existing terms of service that if they are outside the United States, they have a contract with LinkedIn Ireland. New terms that take effect May 8 move non-Europeans to contracts with U.S.-based LinkedIn Corp.

LinkedIn said in a statement on Wednesday that all users are entitled to the same privacy protections. "We've simply streamlined the contract location to ensure all members understand the LinkedIn entity responsible for their personal data," the company said.

Additional reporting by Reuters