Meta’s ‘Consent or Pay’ Scheme Violates EU Antitrust Regulations, According to Commission Findings

Preliminary results from an inquiry by the European Commission reveal that Meta’s ultimatum for Facebook and Instagram users in Europe, “pay or consent,” does not align with the region’s Digital Markets Act (DMA), the regulatory body announced on Monday.

In a news release, the Commission stated that Meta’s all-or-nothing proposition coerces users into allowing their personal data to be combined without offering an equally accessible, albeit less customized, version of these social platforms.

Non-compliance with DMA’s pre-emptive market fairness rules, which have been enforced on Meta and other so-called “gatekeepers” since March 7, could impose significant financial burdens. Confirmed violations could lead to fines amounting to as much as 10% of a company’s global yearly revenue, and this figure could escalate to 20% for subsequent infractions.

This could ultimately compel Meta to discard a business strategy that requires users to consent to data-driven advertising in exchange for access to its platforms.

Following advocacy from privacy and consumer protection groups, the EU initiated a DMA-specific investigation into Meta’s “pay or consent” policy in March. These groups also claimed that an ad-free subscription option does not satisfy the bloc’s data protection and consumer laws.

At the outset, the Commission voiced concerns that Meta’s forced choice did not offer “a genuine alternative” to users averse to its tracking practices. Meta was essentially presenting users with a choice: consent to targeted advertising or pay approximately €13 per month per account for an ad-free service.

The DMA aims to create a fairer competitive environment by addressing various advantages exploited by dominant entities.

In particular, the Commission believes Meta’s predominant position allows it to harvest excessive user data for profiling, unfairly benefiting its advertising business over competitors. The DMA mandates that gatekeepers like Meta must first secure user consent before implementing targeted advertising.

The scrutiny from the regulator suggests Meta is not providing a genuinely free choice to users to opt out of this tracking.

In a session with journalists, senior officials from the Commission underscored that Meta’s differentiated offerings to users objecting to tracking must also be available for free.

Article 5(2) of the DMA, crucially, obligates gatekeepers to obtain consent before merging user data across core platform services and other services. With Facebook, Instagram, and Meta’s ad operations designated as such since September 2023, user permission is needed for targeted ad profiling and delivery.

Users rejecting Meta’s tracking must have access to a less personalized yet comparable alternative, a principle the Commission believes Meta is violating, as a paid membership does not constitute a free substitute.

Additionally, the regulation specifies that access to a service, or any of its functionalities, must not be conditional on user consent.

Responding to the EU’s conclusions, Meta spokesperson Matthew Pollard reiterated the company’s stance in a statement, arguing: “The subscription for an ad-free experience follows the precedent set by Europe’s highest court and aligns with DMA regulations. We are eager to continue our constructive discussions with the European Commission to resolve this investigation.”

However, when queried about this defense, senior Commission officials countered by referencing that the court had indicated a paid version might be permissible as an alternative to ad tracking, but only under necessary circumstances and for a fair fee.

Within this DMA framework, regulators argue that Meta should justify any necessary fees. The EU suggested that Meta might propose a service featuring non-personalized, context-based advertisements as an alternative.

Meta has yet to clarify why it hasn’t provided a complimentary option featuring context-related ads.

It appears the EU is progressing towards offering Meta an ultimatum to enact a privacy-respectful option besides the existing binary choice in the near future.

“To align with DMA requirements, users who decline consent should still have access to a service that utilizes minimal personal data for ad personalization,” the Commission elaborated in the press announcement.

Officials added that while Meta could retain a subscription-based option, any payable service must represent an additional choice, above and beyond a free alternative that doesn’t coerce user authorization for tracking.

As the EU’s investigation unfolds, Meta will have the opportunity to formally address the preliminary findings. The bloc has committed to wrapping up the inquiry within a 12-month frame, hinting at a completion date no later than March 2025.

BEUC, the European consumer advocacy group, applauded the initial findings, urging the EU for swift enforcement. “The Commission’s action to enforce the Digital Markets Act against Meta’s pay-or-consent model is promising. It supplements existing complaints about Meta’s practices violating consumer and data protection laws, raised in recent months by consumer organizations. We now press Meta to adhere to regulations designed for consumer protection,” stated Agustin Reyna, BEUC’s director general, in a remark.