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The European Commission today informed Meta of its preliminary findings that the “pay or consent” advertising model does not comply with the Digital Markets Act (DMA). According to the Commission’s preliminary view, this binary choice forces 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.
Preliminary findings for Meta’s “pay or consent” model
Online platforms often collect personal data from their own services and third-party services to provide online advertising services. Due to their significant position in digital markets, regulators have been able to impose terms of service on their large user base, allowing them to collect vast amounts of personal data. This has given them potential advantages over competitors who do not have access to such a large volume of data, thus setting significant barriers to the provision of online advertising services and social networking services.
According to Article 5(2) of the DMA, regulators must seek user consent for the combination of their personal data between designated core platform services and other services, and if a user refuses such consent, they must be provided with a less personalized but equivalent alternative. Regulators cannot make use of the service or certain functionalities conditional on user consent.
In response to regulatory changes in the EU, Meta introduced in November 2023 a binary “pay or consent” offer, under which Facebook and Instagram users in the EU must choose between: (i) a subscription with a monthly fee for an ad-free version of these social networks, or (ii) free access to a version of these social networks with personalized ads.
The Commission preliminarily views that Meta’s “pay or consent” advertising model does not comply with the DMA, as it does not meet the necessary requirements set out in Article 5(2). Specifically, Meta’s model:
Does not allow users to choose a service that uses less of their personal data but is otherwise equivalent to the service based on “personalized ads”.
Does not allow users to exercise their right to freely consent to the combination of their personal data.
To ensure compliance with the DMA, users who do not consent should have access to a corresponding service that uses less of their personal data, in this case for ad personalization purposes.
Throughout its investigation, the Commission coordinated with the competent data protection authorities.
Next steps
By sending preliminary findings, the Commission informs Meta of its preliminary view that the company is violating the DMA. This does not prejudge the outcome of the investigation. Meta now has the opportunity to exercise its rights of defense by examining the documents in the Commission’s investigation file and responding in writing to the Commission’s preliminary findings. The Commission will complete its investigation within 12 months of the initiation of proceedings on March 25, 2024.
If the Commission’s preliminary views are ultimately confirmed, the Commission will issue a decision finding that Meta’s model does not comply with Article 5(2) of the DMA.
In case of non-compliance, the Commission may impose fines of up to 10% of the regulator’s total worldwide turnover. Such fines can amount to up to 20% in case of repeated infringement. Additionally, in case of systematic non-compliance, the Commission is also empowered to approve additional corrective measures, such as requiring a regulator to sell a business or parts of it or prohibiting a regulator from acquiring additional services related to systemic non-compliance.
The Commission continues its constructive engagement with Meta to identify a satisfactory path to effective compliance. (01/07/2024)