Meta, the parent company of Facebook, recently found itself in hot water with EU regulators over its ad-supported social networking service. The European Commission accused Meta of violating the bloc’s antitrust rules by failing to comply with the requirements set forth in the Digital Markets Act (DMA).
The Accusations
The main issue highlighted by the regulators is Meta’s implementation of a “pay or consent” model for its ad-supported subscription option. This model essentially forces users to choose between paying to use Meta’s platforms ad-free or consenting to their personal data being processed for personalized advertising. The Commission argued that this binary choice is unfair to users as it does not provide them with the option of using a less personalized but equivalent version of Meta’s social networks.
In response to the accusations, a spokesperson for Meta stated that the company’s ad-supported subscription model aligns with the European Court of Justice’s ruling and is in compliance with the DMA. Meta introduced this new model as a response to the court’s decision that companies should offer an alternative version of their service that does not rely on data collection for ads. The company sees the subscription offer as a way to adhere to this requirement.
EU’s Concerns
The European Commission pointed out two key reasons why Meta’s ad-supported service fails to comply with the DMA. Firstly, the service does not allow users to opt for a version that uses less personal data but still offers an equivalent experience to the personalized ads-based service. Regulators believe that users should have the option to access a service that uses minimal personal data for advertising purposes. Secondly, the Commission highlighted that Meta’s model does not give users the ability to freely consent to the use of their personal data for targeted online ads.
The DMA, which became enforceable in March of this year, aims to crack down on anti-competitive practices by large digital companies and to create a more level playing field for competition. Companies found in violation of the DMA could face significant fines, up to 10% of their global annual revenue. For repeat offenders, this penalty could double to 20%. If Meta is found to breach the DMA, it could potentially be fined as much as $13.4 billion, based on its earnings in 2023.
Following the preliminary findings from the EU, Meta now has the opportunity to defend itself in writing before the Commission’s final decision is made. The investigation, which began in March alongside probes into other tech giants such as Apple and Alphabet, is expected to conclude within the next 12 months. Meta will need to address the concerns raised by EU regulators and demonstrate how its ad-supported subscription model complies with the requirements of the DMA.
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