How Meta’s challenge at Cambridge Analytica could change Big Tech’s legal game

But as the dust settles this week, opinions remain divided on whether a successful High Court appeal would set a precedent for US platforms committed to either keeping their parent companies out of trouble or filing a lawsuit in a court of law to make California listen.

Those skeptical of Meta’s legal tactics argue that the High Court’s appeal is a stunt designed to wear down Australia’s notoriously underfunded Office of the Australian Information Commissioner (OAIC), which brought the lawsuit against the platform.

The High Court of Australia in Canberra.

The High Court of Australia in Canberra.Recognition:Andrew Meares

Then there are data protection law experts who believe a case that focuses so narrowly on the wording of Australia’s outdated Data Protection Act 1988 is unlikely to find its way into competition and consumer law – the main arenas in which Big Tech’s Play Jurisdiction Challenges in Australia.

Both of those interpretations may hold water as Australia’s highest court prepares to hear the case. Nonetheless, the fact that the Canberra-based judges will now answer a key question regarding the legal jeopardy of a tech giant remains significant.

When the ruling comes, companies and individuals looking to challenge a global platform in an Australian court will know whether to climb up the corporate ladder and target parent companies, or to dampen enthusiasm and be more selective .

As reported by MLex at the time, there were two sets of arguments supporting Meta’s attempt to appeal an Australian federal court’s decision to move forward with the lawsuit, despite the social media platform’s insistence that Facebook Inc. should not be involved.

The first cluster dealt with the question of jurisdiction and the involvement of Facebook Inc. – as stated at the beginning of the OAIC investigation – in the legal dispute. The second cluster dealt with whether a lawsuit should be initiated without evidence of a clear violation.

Both arguments were granted the High Court’s “special leave” to appeal.

At the heart of the drama is Section 5B of the Data Protection Act 1988, which relates to the extraterritorial application of the legislation. For a foreign company to fall within the statutory provisions, it must have an “Australian connection” – a definition for High Court judges to consider.

The legislation lists six criteria for an organization to meet this threshold: Australian citizenship; a permanent resident of Australia; a partnership formed in Australia; a trust incorporated in Australia; a corporation incorporated in Australia; an unincorporated association having its central management and control in Australia.

But it is the next part of 5B, updated in 2014, that is expected to be hotly contested in the High Court.

An organization or small business owner has an ‘Australian connection’ if all three of the following criteria are met: the business does not fall within the previous six criteria; the company “conducts its business in Australia”; The personal data was collected or stored by the company in Australia “either before or at the time” of the conduct complained of.

This leaves no leeway for then-Facebook Ireland, the company that owns the social media platform’s Australian operations, and can be directly linked to the collection of Australian users’ personal information and its sale to Cambridge Analytica.

While the High Court’s appeal will be based solely on legal arguments, the political rationale for this challenge remains uncertain in Australia, as lawmakers are already poised to review Section 5B in a way that more easily captures the platforms’ global parents.

First, there is no lack of political will to crack down on Meta, as evidenced by the bipartisan support for the world’s most draconian laws against Facebook: the 2019 “heinous violent materials” laws and the 2018 encryption laws.

Abominable Violent Material Act could jail Metas Australian employees for up to three years if the company doesn’t “quickly” remove terrorist content from Australian feeds; while critics warn that encryption laws could jeopardize the security – and arguably the business model – of Facebook’s WhatsApp.

In this political context, parliamentarians began their long-awaited review of the Data Protection Act in 2020. As part of the revision, federal lawmakers also began work in 2021 on a bill specifically designed to protect online privacy and increase penalties for violators of the Data Protection Act.

The High Court has allowed Meta's appeal on a jurisdictional issue.

The High Court has allowed Meta’s appeal on a jurisdictional issue. Recognition:Bloomberg

The first draft of the online law has yet to be submitted to Parliament. However, documents released so far by the Government under the review contain enough detail to indicate that the second part of Section 5B – the three additional provisions that determine when a company can have a ‘link’ to Australia – will be removed entirely could.

In its explanations, the Attorney General’s Office said the proposed changes were necessary because, in the event of a breach of data protection law, “it may be difficult to demonstrate that these overseas organizations are collecting or storing personal data from a source in Australia”.

The reason for this difficulty, the notes say, is that large multinational companies “collect Australian customers’ personal information from a company not incorporated in Australia and transfer it to other companies overseas for processing and storage.” .

“Foreign organizations may collect personal information about Australians but do not collect Australians’ data directly in Australia, instead collecting the information from a digital platform which does not have servers in Australia and therefore may not be considered ‘in Australia’,” it said it in the notes .

Some observers argue that given the Australian legislature’s willingness to scrap a key element of Section 5B, Meta’s High Court challenges will ultimately be counterproductive as they are likely to draw public attention to the law’s extraterritorial flaws.

The argument is that Meta should cherish the moment when it wins that appeal, because all digital platform parents will be fair game once the law changes.

Additional reporting by Laurel Henning.

James Panichi handles regulatory matters for LexisNexis’ MLex.

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Brian Lowry

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