EU accuses Meta of violating digital competition rules

European Commission opens formal probe into Meta business model

by Faruk Imamovic
EU accuses Meta of violating digital competition rules
© Getty Images/Justin Sullivan

European Union regulators on Monday accused social media company Meta Platforms of violating the Union's new digital competition rule by forcing Facebook and Instagram users to choose whether to see ads or pay to avoid them.

Since November, Meta has been giving European users the option to pay for ad-free versions of Facebook and Instagram as a way to comply with the continent's strict data privacy rules.

Desktop browser users need to pay around €10 a month, while iOS or Android users pay around €13 to avoid targeting ads based on their personal data.

The US tech giant introduced the subscription option after the European Union's Supreme Court ruled that under strict EU data privacy rules, Meta must first obtain consent before serving ads to users.

Ad-free service

The European Commission, the EU's executive arm, said the investigation's preliminary findings show Meta's "pay or accept" advertising model violates the 27-member bloc's Digital Markets Act.

Meta's model does not allow users to exercise their right to "freely consent" to allowing their personal data to be combined with various services, including Facebook, Instagram, Marketplace, WhatsApp and Messenger, to target them with personalized online ads, the commission said.

Meta's model also does not give users the option of a service that is less personalized but still equivalent to social networks.

The commission opened its investigation shortly after the ordinance, also known as the DMA, went into effect in March.

"Under Article 5(2) of the DMA, gatekeepers must seek users' consent for combining their personal data between designated core platform services and other services, and if a user refuses such consent, they should have access to a less personalised but equivalent alternative. Gatekeepers cannot make use of the service or certain functionalities conditional on users' consent. To ensure compliance with the DMA, users who do not consent should still get access to an equivalent service which uses less of their personal data, in this case for the personalisation of advertising. Throughout its investigation, the Commission has been coordinating with the relevant data protection authorities," reads the official EU Commission's statement.

A sign in posted in front of Meta headquarters
A sign in posted in front of Meta headquarters© Getty Images/Justin Sullivan

One of the DMA's goals is to curb the power of big tech companies that have amassed vast amounts of personal data about their users, giving them an edge over competitors competing in online advertising or social media services. The commission indicated that Meta would like to find a middle ground with an option that does not rely on sharing users' full personal data, for Meta to comply.

"Today we make another important step to ensure full compliance with the DMA by Meta. Our preliminary view is that Meta’s “Pay or Consent” business model is in breach of the DMA. The DMA is there to give back to the users the power to decide how their data is used and ensure innovative companies can compete on equal footing with tech giants on data access.," said European Commissioner Thierry Breton, who oversees the EU's digital policy.

"Our investigation aims to ensure contestability in markets where gatekeepers like Meta have been accumulating personal data of millions of EU citizens over many years. Our preliminary view is that Meta’s advertising model fails to comply with the Digital Markets Act. And we want to empower citizens to be able to take control over their own data and choose a less personalised ads experience," said the Executive Vice-President in charge of competition policy, Margrethe Vestager.

Meta now has the opportunity to respond to the commission, which must complete its investigation by March 2025. The company could face fines worth 10% of its annual global revenues, which could be measured in billions of euros.

Meta denied its subscription model broke the rules. “Subscription for no ads follows the direction of the highest court in Europe and complies with the DMA,” Meta spokesperson Matt Pollard told WIRED, referring to a Court of Justice of the European Union decision in July 2023 that said that Meta needed to offer users an alternative to ads, if necessary for an appropriate fee. “We look forward to further constructive dialogue with the European Commission to bring this investigation to a close.”

Possible Consequences

"If the Commission's preliminary views were to be ultimately confirmed, the Commission would adopt a decision finding that Meta's model does not comply with Article 5(2) of the DMA.

"In case of non-compliance, the Commission can impose fines up to 10% of the gatekeeper's total worldwide turnover. Such fines can go up to 20% in case of repeated infringement. Moreover, in case of systematic non-compliance, the Commission is also empowered to adopt additional remedies such as obliging a gatekeeper to sell a business or parts of it or banning the gatekeeper from acquisitions of additional services related to the systemic non-compliance.

"The Commission continues its constructive engagement with Meta to identify a satisfactory path towards effective compliance," said EU Commission.