Meta, the parent company of Facebook, has recently come under fire from EU regulators for its ad-supported subscription model. The European Commission has accused Meta of failing to comply with the bloc’s landmark antitrust rules regarding the introduction of this new service, which offers users a “pay or consent” choice. This model requires users to either pay for an ad-free experience on Meta’s platforms or consent to their personal data being processed for personalized advertising. The Commission has raised concerns that this binary choice does not provide users with a less personalized but equivalent version of Meta’s social networks, as required by the Digital Markets Act (DMA).
Meta has defended its ad-supported subscription model, stating that it follows the direction of the highest court in Europe and complies with the DMA. The company introduced this new model in response to a ruling from the European Court of Justice, which stated that companies can offer an “alternative” version of their service that does not rely on data collection for ads. Meta has emphasized that the subscription offer was introduced in line with this ruling and looks forward to engaging in further dialogue with the European Commission to address any concerns.
The European Commission has outlined two key reasons why Meta’s ad-supported offering fails to comply with the DMA. Firstly, the service does not allow users to opt for a version that uses less personal data while still providing an equivalent experience to the personalized ads-based service. Regulators argue that users should have the option to access a service that uses less of their personal data, especially for the personalization of advertising. Secondly, the ad-supported model does not enable users to freely consent to the use of their personal data for targeted online ads, which is a requirement under the DMA.
The Digital Markets Act officially became enforceable in March of this year, aiming to address anti-competitive practices by large digital companies and promote competition in the market. The law allows for significant fines to be imposed on companies found in breach of the rules, with penalties of up to 10% of their global annual revenue. In the case of Meta, potential fines could amount to as high as $13.4 billion, based on the company’s earnings projections for 2023. Meta now has the opportunity to defend itself against the EU’s preliminary findings before the conclusion of the Commission’s investigation within the next 12 months.
The accusations against Meta for violating EU antitrust rules with its ad-supported subscription model highlight the complex nature of regulatory challenges in the digital space. As digital companies continue to innovate and introduce new business models, ensuring compliance with established regulations such as the DMA becomes crucial. The outcome of the Commission’s investigation into Meta’s practices will set an important precedent for the enforcement of antitrust rules in the digital market. It remains to be seen how Meta will address these concerns and navigate the regulatory landscape in Europe moving forward.