EU Fines Meta Over Ad-Free Business Strategy

The EU alerts Meta that its ad-free business strategy on Facebook and Instagram would violate DMA, putting the company at risk of fines equal to 20% of worldwide sales.

TakeAway Points:

  • EU authorities have alerted Meta to the fact that its Facebook and Instagram ad-free membership plan breaches the Digital Markets Act, putting the company in danger of fines of up to 10% of worldwide sales.
  • Despite not providing a less individualised service option, Meta’s subscription is $10.50/month for desktop users and $13/month for mobile users in Europe.
  • With significant resources and an eye towards more communication with the European Commission, Meta is dedicated to compliance; the inquiry is expected to be finished by March 2025.

EU Regulators warns Meta

Meta Platforms Inc. has received a warning from European Union regulators regarding its subscription model for ad-free services on Instagram and Facebook. The European Commission announced on Monday that Meta’s “pay-or-consent” policy does not comply with the EU’s Digital Markets Act (DMA). The Commission’s preliminary findings indicate that the model forces users to consent to the combination of their personal data without offering a less personalized version of the services.

Margrethe Vestager, the European Commission’s antitrust chief, stated, “Our preliminary view is that Meta’s advertising model fails to comply with the Digital Markets Act. We want to empower citizens to be able to take control over their own data and choose a less personalized ads experience.” 

The DMA sets out a series of regulations for major tech platforms, aiming to prevent them from cornering digital markets. Potential fines for breaches can be as high as 10% of global annual revenue, or 20% for repeated violations.

Meta introduced ad-free versions of Facebook and Instagram in November to address regulatory concerns over its data processing practices. The company maintains that its new model complies with the DMA and looks forward to “further constructive dialogue with the European Commission to bring this investigation to a close.”

Meta’s Subscription Model

Meta’s subscription model offers European users the option to pay for ad-free versions of Facebook and Instagram. Desktop browser users can pay approximately 10 euros ($10.50) per month, while iOS or Android users pay around 13 euros. This model was introduced following a ruling by the EU’s top court, which mandated that Meta must obtain user consent before displaying ads based on personal data.

The European Commission argues that Meta’s model does not allow users to freely consent to the combination of their personal data across various services, including Facebook, Instagram, Marketplace, WhatsApp, and Messenger. Additionally, the model does not provide an option for a less personalized but equivalent service. The Commission’s investigation, which began shortly after the DMA took effect in March, aims to ensure that tech “gatekeepers” do not misuse their market power.

Thierry Breton, Commissioner for Internal Market, emphasized the importance of the DMA in giving users control over their data and ensuring fair competition. 

“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,” he said.

Meta’s efforts to comply with DMA

Meta has highlighted its efforts to comply with the DMA, involving over 11,000 employees and more than 590,000 hours of engineering and technical work. The company has also offered to reduce the cost of its subscription service and is awaiting regulatory feedback. Nick Clegg, Meta’s president of Global Affairs, recently warned about the potential costs to European innovation resulting from stringent regulation.

Meta’s spokesperson reiterated the company’s commitment to compliance, stating, “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.”

The Commission’s investigation is set to conclude by March 2025. If the concerns are confirmed, Meta could face fines of up to 10% of its total worldwide turnover, with penalties potentially doubling for repeated infractions.

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