An investigation by the European Commission has found that Meta’s “pay or consent” offering to Facebook and Instagram users in Europe does not comply with the bloc’s Digital Markets Act (DMA), according to preliminary findings reported by the regulator on Monday.
The Commission wrote in a press release that the binary choice offered by Meta “requires users to consent to the combination of their personal data and does not provide them with a less personalized but equivalent version of Meta’s social networks.”
Failure to comply with the ex ante contestability regulation, which has applied to Meta and other “gatekeepers” since March 7, could cost the ad tech giant dearly. Penalties for proven violations can reach up to 10% of global annual revenue, and even 20% for repeat offenses.
More importantly, Meta may ultimately be forced to abandon a business model that requires users to accept surveillance advertising as the “price” of entry to use its social networks.
In March, the EU opened a formal investigation into Meta’s “pay or consent” offering, after months of lobbying by privacy and consumer groups. They also argued that a subscription that opted out of ads was also not in line with EU data protection or consumer protection rules.
In March, the Commission expressed concern that Meta’s binary choice did not provide a “real alternative” for users who did not consent to its tracking. Meta essentially asked users to either agree to be tracked so that it could continue to serve targeted ads, or pay around €13 per month (per account) to access ad-free versions of the services.
The EU’s goal with the DMA is to level the playing field by targeting various advantages that gatekeepers can exploit using their dominance.
In Meta’s case, the Commission considers that the company’s dominant position on social networks allows it to extract more data from users to profile them, giving its advertising business an unfair advantage over its competitors. To restore the dynamic, the EC introduced a requirement in the DMA that gatekeepers must obtain permission from individuals before they can track them for advertising purposes.
The regulator’s case against Meta argues that the ad tech giant fails to provide people with a free and fair choice to opt out of tracking.
Briefing reporters ahead of the announcement, senior Commission officials stressed that while Meta’s social networking services are free, the equivalent versions it offers to users who do not wish to consent to tracking must also be free.
The relevant section of the DMA here is Article 5(2), which requires gatekeepers to seek users’ consent to combine their personal data between designated core platform services (CPS) and other services. Facebook, Instagram and Meta’s advertising activities have been designated as CPS since September 2023, so the company needs users’ permission to track and profile their activity and serve “personalised” ads.
Users who opt out of Meta’s tracking have the right to access a less personalized but equivalent alternative, and the Commission’s preliminary view after approximately three months of investigation is that Meta is in breach of this requirement, as a paid subscription is not a valid equivalent of free access.
The regulation also stipulates that access controllers cannot make the use of a service or certain functionalities conditional on users’ consent.
Meta spokesman Matthew Pollard responded to the EU findings with a statement attributed to a company spokesperson. Meta reiterated its defense of the approach by citing a previous ruling by the EU Court of Justice, writing: “The ad-free subscription follows the direction of Europe’s highest court and is in line with the DMA. We look forward to continuing the constructive dialogue with the European Commission to bring this investigation to a conclusion.”
Asked about this defence, senior Commission officials stressed that the ruling referred to by Meta implied that the Court of Justice had warned against suggesting that a paid version of a service could be offered as an alternative to ad tracking, saying that only “if necessary” an “appropriate fee” could be charged.
In the context of the DMA, the bloc’s law enforcement officials say a gatekeeper would therefore have to justify the need for a fee. The EU has stressed that Meta could offer an alternative service with advertising that does not rely on any personal data for targeting, such as contextual advertising.
Meta has never explained why it doesn’t offer users a free contextual advertising option.
The EU appears to be on track to force Meta to offer a non-binary, privacy-friendly choice in the coming months.
“To ensure compliance with the DMA, users who do not give their consent should nevertheless have access to an equivalent service that uses less of their personal data, in this case for the personalisation of advertising,” the Commission noted in the statement.
Commission officials noted that Meta could still offer a subscription option, but any paid choice would have to be an additional offering (i.e. a third choice) on top of a free equivalent that does not ask users for consent to be tracked.
The EU investigation is not yet complete, and Meta will have the opportunity to formally respond to the preliminary findings. But the window of opportunity is limited: the Union has set itself a 12-month deadline to complete the investigation, which suggests it must finish the work by March 2025 or earlier.
BEUC, the European consumer organisation, welcomed the preliminary findings and urged the EU to implement the law swiftly.
“It is good news that the Commission is taking enforcement action based on the Digital Markets Act against Meta’s payment or consent model. This comes on top of the complaints against Meta’s model for breach of consumer law and data protection law, which consumer organisations have filed in recent months. We now urge Meta to comply with laws designed to protect consumers,” said Agustin Reyna, BEUC Director General, in a statement.