Initial findings by the European Commission investigating the controversial binary choice that Meta has imposed on regional users of its social networks, Facebook and Instagram, since last fall are not in line with the bloc’s Digital Markets Act (DMA).
Failure to comply with the antitrust rules, which have been in place for Meta and other so-called “gatekeepers” since March 7, could be extremely costly for the ad tech giant. Penalties for proven violations could reach 10% of global annual sales or 20% for repeat offenders.
More importantly, Meta may finally have to abandon its anti-privacy business model that requires users to agree to surveillance ads as the “price” of entry to its social networking services.
The European Union announced a formal investigation into the Meta app for offering “pay or consent” to users on March 25 — after months of criticism from privacy and consumer advocacy groups who also claim the opt-in does not comply with EU data protection or consumer protection rules.
In March, the Commission, the sole enforcer of the DMA, said it was concerned that the binary choice offered by Meta — where users of its social networks are asked to agree to be tracked and profiled so it can continue to serve them micro-targeted ads or pay up to around €13 per month (per account) to access ad-free versions of the services — may not provide a “real alternative” for users who do not agree to have their data collected and integrated into ads.
The EU’s aim with the Direct Data Authority is to level the playing field by targeting the various advantages that portals can exploit due to their dominance – including in the data sphere.
In Meta’s case, a dominant position in social networks translates into the ability to extract more data from web users to profile them – giving its advertising unit an unfair advantage versus competitors as seen by the EU. His dynamic reset tool is a requirement in the DMA that gatekeepers get people’s permission to track ads. Its case against Meta asserts that the ad tech giant is failing to provide people with a free and fair choice to opt out of tracking.
In its preliminary findings report on Monday, the committee wrote in press release That the binary choice offered by Meta “forces users to consent to the merging of their personal data and fails to provide a less personalized but equivalent version of Meta’s social networks.”
In a press briefing before the announcement, senior Commission officials stressed that as long as the social media services provided by Meta are free to enable people to access equivalent versions of it to users who do not want to consent to being tracked, they should also be free.
The relevant DMA article here is Article 5(2) which requires gatekeepers to obtain users’ consent to combine their personal data between designated platform services (CPS) and other services.
Meta’s social networks, Facebook and Instagram, and its advertising businesses, have been classified as CPS since September 2023 — meaning the ad tech giant needs to ask users for permission to track and categorize their activity to run what it refers to as “personalized” ads.
Users who refuse Meta tracking have a legal right to access a less personalized but equivalent alternative, and the Commission’s preliminary opinion after about three months of investigation is that Meta is in violation of this requirement because the paid subscription is not a valid equivalent to free access.
The law also stipulates that gatekeepers may not use a particular service or functionality subject to users’ consent.
Meta spokesman Matthew Pollard responded to the EU findings by sending an email statement attributed to a company spokesperson. In the statement, Meta reiterated its defense of this approach by citing a previous ruling by an EU court – writing: “Subscription without ads follows the guidance of Europe’s highest court and is compatible with digital marketing law. We look forward to further constructive dialogue with the European Commission.” To end this investigation.”
Senior Commission officials were asked about this defense during today’s briefing. The EU noted that the ruling Meta refers to includes the Court of Justice warning against the suggestion that a paid version of the service might be offered as an alternative to tracking ads – by saying that only “if necessary” could an “appropriate fee” be charged.
In the context of the DMA, EU enforcers say the gatekeeper will therefore have to argue reasons why a fee is necessary. The European Union points out that in the case of Meta, could Offering an equivalent alternative to the fully certified service that features ads that do not rely on processing any personal data for targeting – such as contextual advertising.
Meta has never explained why it chose not to offer users a free contextual advertising option — opting instead for a binary “pay or consent” requirement.
But the EU appears to be on track to force Meta to provide a non-binary, privacy-friendly option in the coming months.
“To ensure compliance with the Data Market Law, users who do not consent should obtain access to an equivalent service that uses less of their personal data, in this case to personalize advertising,” the Commission noted in a press release.
Commission officials also note that Meta could still offer a subscription option — but they stress that any paid option must be an additional offering (i.e., a third option, etc.) — that is, in addition to the unpaid equivalent that does not require users to consent to being tracked.
The European Union investigation has not yet concluded. Meta will now have the opportunity to formally respond to the preliminary findings. But there is limited opportunity for developments here: the EU has set itself a 12-month timeline to complete the investigation – suggesting it needs to finish the job by or before March 2025.
The European Consumers’ Organisation (BEUC) welcomed the initial results, and urged the EU to move forward with rapid implementation.
“It is good news that the Commission has taken enforcement action under the Digital Markets Act against Meta’s pay-or-consent model,” said Agustin Reina, director general of the European Consumers Union, in a statement. “This follows complaints against Meta’s model for breaches of consumer law and data protection law filed by consumer organizations in recent months. We now urge Meta to comply with laws aimed at protecting consumers.”