Meta, the parent company of Facebook and Instagram, has been charged by EU antitrust regulators for failing to comply with the bloc's Digital Markets Act (DMA). The charges stem from Meta's recently introduced "pay-or-consent" advertising model, which has already drawn the ire of privacy regulators and activists. This model gives users a choice: consent to being tracked and receive a free service funded by advertising revenues, or pay for an ad-free experience.
The European Commission, acting as the EU's competition enforcer, stated that this binary choice violates the DMA. The Commission's preliminary findings, sent to Meta, argue that the model forces users to consent to the combination of their personal data and does not provide a less personalized yet equivalent version of Meta's social networks.
"We want to empower citizens to be able to take control over their own data and choose a less personalized ads experience," said Margrethe Vestager, EU antitrust chief, in a statement.
Meta has defended its model, asserting that it complies with a ruling from the European Court of Justice (ECJ). "Subscription for no ads 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," a Meta spokesperson said.
Should Meta be found guilty of breaching the DMA, the company could face fines of up to 10% of its global annual turnover. The Commission has until March next year to conclude its investigation.
Privacy activists and watchdogs have also criticized Meta's advertising model. Reuters was the first to report that the EU competition enforcer would charge Meta with non-compliance under the DMA. This charge comes a week after the EU issued its first DMA charge against Apple for similar non-compliance.
Meta's ad-supported subscription service, launched last November, was intended to address concerns raised by the ECJ ruling. The service requires users to either pay for an ad-free experience or consent to their data being used for personalized ads. The Commission, however, argues that this model fails to offer users an equivalent service that uses less personal data.
"In the Commission's preliminary view, this binary choice forces users to consent to the combination of their personal data and fails to provide them a less personalized but equivalent version of Meta's social networks," the regulators said in a statement.
The DMA, which became enforceable in March this year, aims to curb anti-competitive practices by large digital companies and force them to open up some of their services to rivals. Companies found in breach of the DMA can face hefty fines, potentially up to 10% of their global annual revenue, with repeated breaches escalating this to 20%.
If Meta is found in violation of the DMA, it could face penalties as high as $13.4 billion based on its 2023 annual earnings. Meta now has the opportunity to defend itself in writing before the Commission makes a final decision.
The Commission's investigation, launched in March alongside probes into tech giants Apple and Alphabet, will conclude within 12 months.
