Meta’s ‘pay or consent’ model fails EU competition rules, finds Commission

An investigation by the European Commission has found that Meta’s “pay or approve” offer to Facebook and Instagram users in Europe does not comply with the bloc’s Digital Markets Act (DMA), according to preliminary findings reported by the regulator on Monday. .

The commission wrote in a press release that the binary choice that Meta offers “forces users to accept the combination of their personal data and does not offer them a less personalized but equivalent version of Meta’s social networks.”

Failure to comply with ex-ante market contestability regulation, which applied to Meta and other so-called “gatekeepers” since March 7, could be extremely costly for the adtech giant. Penalties for confirmed violations can reach up to 10% of global annual turnover, and even 20% for repeat violations.

Most prominently, Meta may finally be forced to abandon a business model that requires users to accept surveillance ads as the “price” of entry for using its social networks.

The EU in March opened a formal DMA investigation into Meta’s “pay or approve” offer, after months of lobbying by privacy and consumer protection groups. The groups also argued that a subscription to not see ads does not comply with the blockchain’s data protection or consumer protection rules.

In March, the Commission said it was concerned that Meta’s binary choice may not offer “a real alternative” to users who opt out of following it. Meta basically asks users to either agree to be tracked so it can continue serving targeted ads, or pay almost €13 per month (per account) to access ad-free versions of the services.

EU’s goal with DMA is to level the playing field by targeting different advantages that goalkeepers can exploit by using their dominance.

In Meta’s case, the Commission believes that the company’s dominant position in social networks allows it to extract more data from users to profile them, which gives its advertising business an unfair advantage over competitors. To restore the dynamic, the EC introduced a requirement in the DMA that gatekeepers must obtain people’s permission before they can be tracked for advertisements.

The regulator’s case against Meta alleges that the information technology giant is failing to provide people with a free and fair choice to opt out of tracking.

In a press conference ahead of the announcement, senior Commission officials pointed out that as long as Meta’s social networking services are free, the equivalent versions it offers to users who don’t want to consent to tracking should also be free.

The relevant article of the DMA here is Article 5(2), which requires custodians to seek users’ consent to combine their personal data between designated core platform services (CPS) and other services. Facebook, Instagram and Meta’s advertising business have been designated as CPS since September 2023, so the company needs users’ permission to track and profile their activity and run “personalized” ads.

Users who refuse to follow Meta have the right to access a less personalized but equivalent alternative, and the Commission’s preliminary view after about three months of investigation is that Meta is violating this requirement, as a paid subscription is not an equivalent of valid with free access.

The regulation also provides that gatekeepers cannot use a service or certain functions with the consent of users.

Meta spokesman Matthew Pollard responded to the EU’s findings by sending a statement attributed to a company spokesperson. Meta reiterated a defense of the approach citing an earlier EU court ruling, writing: “Subscribing to no ads follows the guidance of the highest court in Europe and is in line with the DMA. We look forward to further constructive dialogue with the European Commission to close this investigation.”

Asked about this protection, senior Commission officials pointed out that the decision Meta refers to included the Court of Justice not ending the suggestion that a paid version of a service could be offered as an alternative to tracking ads, saying that only “if necessary” can an “appropriate fee” be charged.

In the context of DMA, block implementers say that a gatekeeper must argue why a fee is necessary. The EU noted that Meta can offer an alternative service with advertisements that do not rely on any personal data for targeting – such as contextual advertising.

Meta has never explained why it didn’t offer users a free, contextual advertising option.

The EU appears to be on track to force Meta to offer a non-binary and secure privacy choice in the coming months.

“To ensure compliance with the DMA, users who do not provide consent must still have access to an equivalent service that uses less of their personal data, in this case for advertising personalization,” the Commission emphasized in the press release.

Commission officials noted that Meta may still offer a subscription option, but any paid choice must be an additional offering (ie, a third choice) on top of a free equivalent that does not require users’ consent to t was traced.

The EU investigation is not yet complete and Meta will have the opportunity to formally respond to the preliminary findings. But there’s a limited window for things to develop here: The bloc has given itself a 12-month deadline to complete the investigation, which suggests it should finish work on or before March 2025.

BEUC, the European consumer organisation, welcomed the preliminary findings, urging the EU to push for swift implementation.

“It is good news that the Commission is taking enforcement action based on the Digital Markets Act against Meta’s payment or consent model. It comes on top of complaints against Meta’s model for violating consumer law and data protection law, which consumer organizations have raised in recent months. We now call on Meta to comply with laws intended to protect consumers,” said Agustin Reyna, BEUC director general, in a statement.

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