EU charges Meta with breaking digital rules

The European Commission has targeted Mark Zuckerberg-run Meta Platforms Inc.’s subscription model for ad-free services over violations of new digital laws.

The regulator said Meta’s so-called pay-or-consent policy goes against the European Union’s Digital Markets Act (DMA) as it “forces users to consent to the combination of their personal data and fails to provide them a less personalized but equivalent version of Meta’s social networks.”

“Our preliminary view is that Meta’s advertising model fails to comply with the Digital Markets Act. And we want to empower citizens to be able to take control over their own data and choose a less personalized ads experience,” Margrethe Vestager, executive vice-president in charge of competition policy, said.

The Commission shared its preliminary findings in a report published on July 1.

Online platforms collect massive amounts of personal data from users, which can then be used to power the online advertising business. Dominant firms with a large user base (such as Meta), referred to as “gatekeepers,” can leverage this data advantage, the Commission said.

This dominance will give them an edge over competitors, who don’t have access to the same level of information, thus creating a barrier for new companies that try to enter the online advertising space, the Commission said in its report.

To address this imbalance, the DMA stepped in, targeting gatekeepers, and aimed to rein in big tech companies and promote fair competition within the digital market.

The act required them to get user consent before combining data collected across their core services and other offerings. If a user were to refuse to consent, they would still be granted access to a similar service, even if it was less personalized.

Additionally, the DMA prohibited gatekeepers from making access to their services or specific features conditional upon user consent.

In response to these changes in regulation, Meta introduced a model that gave users two options: pay a monthly fee or see personalized ads based on their data.

According to the Commission, this unfairly forced the users to choose between privacy and free access, while also ensuring that users couldn’t opt for a less data-intensive version with reduced personalization.

This is just the initial finding, and Commission has 1 year to reach a final decision.

Meta has responded to the Commission’s allegations.

“Subscription for no ads follows the direction of the highest court in Europe and complies with the DMA. We look forward to further constructive dialogue with the European Commission to bring this investigation to a close,” said a Meta company spokesperson.

If the model is indeed found to break the DMA’s rules on user consent, Meta could face fines up to 10% of its global revenue. In extreme cases, the Commission could even force Meta to sell parts of its business.

The Commission will conclude its investigation within 12 months of the opening of proceedings on 25 March 2024.

“The DMA is there to give back to the users the power to decide how their data is used and ensure innovative companies can compete on equal footing with tech giants on data access,” said Thierry Breton, commissioner for internal markets at the EU.