Global: EU Finds Meta’s ‘Pay or Consent’ Model in Violation of Competition Rules

The European Commission’s investigation has revealed that Meta’s “pay or consent” offer for Facebook and Instagram users in Europe violates the Digital Markets Act (DMA), according to preliminary findings announced on Monday.

In a press release, the Commission stated that Meta’s binary choice forces users to either consent to the aggregation of their personal data or pay for a subscription, without offering a less personalized, free version of its social networks.

The DMA, which has applied to Meta and other “gatekeepers” since March 7, requires compliance with market contestability regulations. Non-compliance can result in significant penalties, up to 10% of the company’s global annual turnover and 20% for repeat offenses.

More critically, Meta may be compelled to abandon its business model that mandates user consent to surveillance advertising as the cost of accessing its social networks.

The European Union launched a formal DMA investigation into Meta’s “pay or consent” model in March, prompted by privacy advocacy and consumer protection groups. These groups argued that even a subscription to avoid ads does not align with the bloc’s data protection or consumer protection standards.

In March, the Commission expressed concerns that Meta’s binary choice might not offer a genuine alternative for users who refuse to be tracked. Essentially, Meta required users to either agree to data tracking for targeted advertising or pay nearly €13 per month per account for ad-free access.

The DMA aims to create a level playing field by addressing the advantages that gatekeepers like Meta can exploit through their dominant positions.

The Commission believes Meta’s dominance in social networking enables it to collect extensive user data, providing its ad business with an unfair advantage over competitors. To address this, the DMA mandates that gatekeepers obtain explicit consent from users before tracking them for ads.

The regulator’s case asserts that Meta is not providing a fair choice to refuse tracking. Senior Commission officials clarified that as long as Meta’s services remain free, any equivalent versions offered to users who decline tracking must also be free.

Article 5(2) of the DMA requires gatekeepers to seek user consent for combining personal data across core platform services (CPS) and other services. Since September 2023, Facebook, Instagram, and Meta’s ad business have been designated as CPS, necessitating user permission for tracking and personalized ads.

Users who reject tracking have the right to access a less-personalized but equivalent service. The Commission’s preliminary findings, after a three-month investigation, indicate that Meta is violating this requirement, as a paid subscription is not considered a valid equivalent to free access.

The regulation also prohibits gatekeepers from conditioning the use of a service or certain functionalities on user consent.

Meta spokesman Matthew Pollard responded to the findings, stating that the subscription model complies with a previous EU court judgment and the DMA. He expressed willingness to engage in further dialogue with the Commission.

However, senior Commission officials noted that the court judgment cited by Meta suggested a fee for an alternative to tracking ads only “if necessary.” In the DMA context, Meta would need to justify the necessity of such a fee. The Commission suggested that Meta could offer a free, contextually-targeted ad service that does not rely on personal data.

The EU appears poised to compel Meta to provide a non-binary, privacy-respecting choice. The Commission emphasized that users who do not consent to tracking should still have access to an equivalent service with less personal data usage for ad personalization.

The investigation is ongoing, and Meta will have an opportunity to formally respond to the preliminary findings. The EU aims to complete the probe by or before March 2025.

The European consumer organization BEUC welcomed the findings, urging swift enforcement. Agustin Reyna, BEUC’s director general, stated, “It’s good news that the Commission is taking enforcement action based on the Digital Markets Act against Meta’s pay-or-consent model. We now urge Meta to comply with laws meant to protect consumers.”