The lawsuit claims that Meta is misusing its market dominance and generating revenues from consumers’ data without providing proper compensation to them. This is the first time that a legal claim of such kind has been brought against Meta-owned social media platform Facebook in the U.K.
The claim will seek financial redress for Facebook users numbering more than 44 million in the U.K. between Oct 1, 2015 and Dec 31, 2019. The lawsuit is claiming a minimum of £2.3 billion ($3.2 billion) in damages.
The lawsuit has argued that Facebook has used its platform and outside mechanisms like Facebook Pixel, which is an advertising tool used by third-party websites, to monitor user activities.
Meta’s Legal Woes Increasing: A Major Headwind
Meta Platforms owned Facebook enjoys dominant market share in the U.K. According to the recent legal claim, Meta has used this dominance to impose unfair terms and conditions of usage.
However, this is not the first time Meta is facing such legal implications. The company’s legal woes have been increasing over time.
As Meta hosts a massive amount of personal data, which it uses to attract advertisers, the company has been under constant scrutiny from privacy groups and federal agencies. Meta has been criticized for allegedly selling personal data to advertisers to bolster its top line.
The Cambridge Analytica data fiasco sparked major concerns about data privacy and security, which led to increased scrutiny over data security and a relatively heavy regulatory pressure from all corners on Meta.
Meta successfully settled the FTC inquiry but had to pay a huge penalty of $5 billion.
The company is being investigated by the International Trade Commission (ITC) for violating antitrust principles. Meta is also facing an antitrust investigation from FTC. These are major concerns for the company at least in the near term.
Meta Facing Stiff Competition in Metaverse and Augmented Reality
Meta recently announced its Ray-Ban Stories smart glasses developed in collaboration with EssilorLuxottica, which will intensify the competition further.
AR glasses from Meta, once available, will compete against the likes of Apple (AAPL – Free Report) and Alphabet (GOOGL – Free Report) division Google. However, the U.K.’s Information commission last week announced that it wants to keep Meta under scrutiny whether they do enough to protect the privacy and data of children.
Meta is already facing extreme competition across various platforms like Social media, Metaverse and Augmented Reality. Further, increased scrutiny by Legal Authorities will cost the company unnecessary expenses in the form of legal fees and penalty charges affecting and, in turn, the top line.
Zacks Rank and Performance of Other Stocks
Meta currently carries a Zacks Rank #3 (Hold).
Shares of Meta have appreciated 29.9% outperforming the Computer and Technology Sector in the past year. The Zacks Consensus Estimate for 2022 earnings has moved downward by a nickel in the past 60 days to $13.91 per share.
Meta has outperformed its Social Networking Peer Twitter (TWTR – Free Report) . Shares of Twitter have tumbled 14.3% in the past year. The Zacks Consensus Estimate for 2022 earnings has moved downward by 25 cents in the past 60 days to 14 cents per share.
Alphabet shares have returned 60.5% in the past year. The Zacks Consensus Estimate for 2022 earnings has moved upward by 43 cents in the past 60 days to $108.29 per share.
However, Apple is a stock in the same industry that investors can consider. It carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Apple shares have appreciated 35.5% in the past year. The Zacks Consensus Estimate for 2022 earnings has moved upward by a nickel in the past 60 days to $5.82 per share.