Meta has challenged the UK regulator in court over how it calculates fees and fines under the UK’s online safety law, as it argued the methods are disproportionate and unlawful.
The tech giant has questioned the media regulator, Ofcom, over its definition of ‘qualifying worldwide revenue’, which it uses to calculate financial penalties and fees for tech companies which earn over £250m a year.
The parties are at a judicial review hearing in the English High Court on Tuesday and Wednesday.
The regulator created and drafted the Qualifying Worldwide Revenue (QWR) provisions in September last year under the Online Safety Act, which introduced new protections against harmful online content. Under the rules, firms found to have breached safety rules can face fines of up to 10 per cent of qualifying worldwide revenue or £18m, whichever is the higher amount.
Under the new rules, if Ofcom enforces against a single entity owned by a tech firm, such as a social media platform, it will calculate financial penalties based only on that entity’s revenue.
However, if the regulator enforces against multiple entities, including a firm’s parent company and subsidiaries, it can instead calculate the amount based on the group’s total revenue generated from everything, including non-regulated activities such as enterprise software.
According to court filings seen by City AM, Meta has alleged the Online Safety Act does not give the regulator powers to include revenue for non-regulated services when pursuing multiple entities, and so Ofcom is breaching its own statutory powers and “acting irrationally” by creating a “double counting” approach to calculating fines and fees.
The US tech firm is claiming Ofcom deliberately adopted the “broadest possible approach” of those rules to grant itself power to impose financial penalties on providers “at an unprecedented level of magnitude.”
Ofcom, however, argued that Meta “is incorrect” and that it “struck a careful balance” in adopting its approach to calculating financial penalties.
“A fundamental flaw with this argument is that it was no part of the purpose of the QWR Regulations to set the ‘level’ of any penalty. The QWR Regulations determine the methodology for calculating the maximum penalty in a particular case, but Ofcom will determine the appropriate and proportionate level of penalty on the facts of the case at hand,” Ofcom said in court filings seen by City AM.
In a statement, a Meta spokesperson said the tech giant is “committed to cooperating constructively with Ofcom as it enforces the Online Safety Act.”
“However, we and others in the tech industry believe its decisions on the methodology to calculate fees and potential fines are disproportionate. We believe fees and penalties should be based on the services being regulated in the countries where they’re being regulated. This would still allow Ofcom to impose the largest fines in UK corporate history,” the spokesperson said.
An Ofcom spokesperson said in a statement: “Parliament has charged us with the job of regulating an industry that has been unregulated and unaccountable for more than 20 years.”
“Effective regulation relies on our ability to gather information, levy appropriate fees, issue fines and apply the law as intended. While legal challenges are an important part of any regulatory regime, we will defend them robustly as part of our mission of making life safer online for people in the UK.”
Regulator ‘operating in a highly litigious environment’
During a meeting for the House of Lords Communications and Digital Committee on 15 September, Ofcom’s group director for online safety, Oliver Griffiths, said the regulator is “operating in a highly litigious environment” as it is facing two lots of legal proceedings brought by Meta over its fee calculation, amongst other online service providers bringing similar claims.
Griffiths added the regulator has “a raft of services that are bringing judicial reviews against us for trying to collect data so that we can monitor and evaluate what is happening” with the online safety regime.