Preliminary findings by the European Commission into a controversial binary choice that Meta has been imposing on regional users of its social networks Facebook and Instagram since last fall do not comply with the bloc's Digital Markets Act (DMA).
Failure to comply with the ex-ante market stability regulation, which has been in place for Meta and other so-called “gatekeepers” since March 7, could be extremely costly for the adtech giant. Fines for confirmed violations can reach 10% of annual global revenue or 20% for repeat violations.
Even more striking, Meta could ultimately be forced to abandon a business model that's hostile to privacy and requires users to agree to surveillance advertising as the “price of entry” into the social networking services.
The EU announced on March 25 that it has opened a formal DMA investigation into Meta's implementation of a “pay or consent” offer to users, following months of criticism from privacy and consumer protection groups who also allege the subscription does not comply with the bloc's data protection or consumer protection rules.
In March, the Commission, the DMA’s sole enforcer, said it was concerned that the binary choice Meta offered – asking users of its social networks to agree to its tracking and profiling so it could continue to serve micro-targeted ads or else pay almost €13 per month (per account) to access ad-free versions of the services – might not offer a “real alternative” for users who do not consent to Meta collecting and combining their data for advertising.
The EU's aim with the DMA is to create a level playing field by focusing on the various advantages that gatekeepers can exploit thanks to their dominant position, including in the area of data.
In Meta’s case, a dominant position on social networks translates into an ability to harvest more data from web users for profiling — giving the ad entity an unfair advantage over competitors, as the EU sees it. The tool to reset the dynamic is a requirement under the DMA that gatekeepers obtain people’s consent for ad tracking. The case against Meta alleges that the ad tech giant is failing to give people a free and fair choice to opt out of tracking.
The Commission reported its preliminary findings in a letter on Monday press release that the binary choice Meta offers “forces users to consent to the combination of their personal data and does not offer them a less personalized but equivalent version of Meta's social networks.”
In a briefing with journalists ahead of the announcement, senior Commission officials stressed that as long as Meta's social networking services are free for people, the equivalent versions it offers to users who do not wish to consent to being tracked should also be free.
The relevant DMA article in this regard is Article 5(2), which requires gatekeepers to obtain users' consent for combining their personal data between designated core platform services (CPS) and other services.
Meta's social networks, Facebook and Instagram, as well as its advertising business, have been classified as CPS since September 2023. This means the ad tech giant must ask users for permission to track and profile their activities in order to serve what it calls “personalized” ads.
Users who refuse Meta's tracking have a legal right to access a less personalized but equivalent alternative. After approximately three months of investigation, the Commission provisionally considers that Meta breaches this requirement, as a paid subscription is not a valid equivalent of free access.
The regulation also stipulates that gatekeepers may not make a service or certain functionalities dependent on user consent.
Meta spokesperson Matthew Pollard responded to the EU’s findings with an emailed statement attributed to a company spokesperson. In it, Meta reiterates a defense of its approach by citing an earlier ruling by the European Court of Justice – writing: “The no ads subscription 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 conclude this investigation.”
Senior Commission officials were questioned about this defence at today’s press briefing. The EU pointed out that the ruling Meta refers to is before the Court of Justice, which rejects the suggestion that a paid-for version of a service can be offered as an alternative to ad-tracking – saying that only “if necessary” can an “appropriate fee” be charged.
In the DMA context, the bloc's enforcers say that a gatekeeper would therefore have to argue why a fee is necessary. And the EU points out that this is the case in the case of Meta could be provide an equivalent alternative to a fully permitted service that delivers advertising that does not rely on the processing of 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 payment or consent prompt.
But it appears the EU will force Meta to offer a non-binary, privacy-safe choice in the coming months.
“To ensure compliance with the DMA, users who do not consent should still be given access to an equivalent service that uses less of their personal data, in this case for personalising ads,” the Commission said in the press release.
Commission officials also note that Meta could still offer a subscription option – but they emphasize that any paid choice would have to be a complementary offer (i.e. a third choice etc.) – i.e. on top of a non-paid equivalent which does not require user consent. its tracking.
The EU investigation has not yet been completed. And Meta will now have the opportunity to formally respond to the preliminary findings. But there is a limited window in which things can play out: the bloc has given itself a 12-month timeline to complete the investigation – suggesting it must complete the job before or in March 2025.
The European consumer organization BEUC welcomed the preliminary findings and urged the EU to act swiftly on enforcement.
“It is good news that the Commission is taking enforcement action under the Digital Markets Act against Meta's payment-or-consent model. It is in addition to complaints against Meta's model for violations of consumer and data protection law that consumer organizations have filed in recent months. We urge now urges Meta to comply with laws designed to protect consumers,” said Agustin Reyna, director general of BEUC, in a statement.
