The European Union (EU), has accused giant tech company Meta, of failing to comply with the Digital Markets Act (DMA) after findings revealed that its ad-supported subscription service, a “pay or consent” model, breached the antitrust rules.
The Commission in its preliminary findings, disclosed that the model forces users to consent to the combination of their data and fails to provide them with a less personalized but equivalent version of Meta’s social networks.
Notably, the Commission takes the preliminary view that Meta’s “pay or consent” advertising model is not compliant with the DMA as it does not meet the requirements.
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It highlighted two areas where the model breaches the Anti-trust rules:
- Does not allow users to opt for a service that uses less of their personal data but is otherwise equivalent to the “personalised ads” based service.
- Does not allow users to exercise their right to freely consent to the combination of their personal data.
Recall that Meta introduced the “pay or consent” model in November 2023, whereby EU users of Facebook and Instagram have to choose between two options. The first option which is the subscription for a monthly fee to an ads-free version of these social networks, and the second which is the free-of-charge access to a version of these social networks with personalized ads.
It is worth noting that Meta rolled out this model because they had faced legal issues earlier that same year when the European Data Protection Board (EDPB) issued a binding decision banning the platform’s targeted advertising practices across the EU/EEA.
Meanwhile, in response to the EU’s recent findings, a Meta spokesperson told CNBC that its ad-supported subscription model 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”, the spokesperson added.
To ensure compliance with the DMA, the EU said that users who do not consent should still get access to an equivalent service that uses less of their data, in this case for the personalization of advertising. Throughout its investigation, the Commission has been coordinating with the relevant data protection authorities.
By sending preliminary findings, the Commission informs Meta of its preliminary view that the company is in breach of the DMA.
Meta now can exercise its rights of defense by examining the documents in the Commission’s investigation file and replying in writing to the Commission’s preliminary findings. The Commission will conclude its investigation within 12 months from the opening of proceedings on 25 March 2024.
In case of non-compliance, the Commission can impose fines of up to 10% of the gatekeeper’s total worldwide turnover. In Meta’s case, if found guilty, it could be fined with a penalty as high as $13.4 billion, based on the company’s 2023 annual earnings numbers.