[pimmen]

They have to follow German law because they have German users, German customers (German companies buying ads), use German infrastructure, German marketing and German offices housing German employees.

If they would like to turn their back to an 80 million people market, sure. However, if this becomes the EU standard, it jumps up to a market of almost 500 million people. Hard to turn that down.

[virmundi]

If they have users, but transact everything in Dollars and only host out of the US, does Germany have claim to dictate terms? For example if Germans come to America and buy things, the German government has little control to exert power.

[pimmen]

You're correct, but that's not the case. They host all across the EU (and have special agreements with the local governments about power supply for example), have employees all across the EU, accept Euros as payment and wouldn't want it any other way. If they didn't, it would be much harder for them to stay competitive in the EU. If they stop they would negatively impact the experience for their users and customers in Germany, meaning losses of revenue from that market and the risk of being overtaken.