Preliminary findings from an investigation by the European Commission into controversial binary options imposed by Meta on regional users of its social networks Facebook and Instagram since last year do not comply with the bloc’s rules. Digital Markets Act (DMA)
Non-compliance with the pre-market competition regulation imposed on Meta and other so-called “gatekeepers” from March 7 could be extremely costly for the edtech giant. Fines for confirmed violations can reach 10% of global annual turnover or 20% for repeated offenses.
More importantly, Meta may eventually be forced to abandon its anti-privacy business model, which demands users agree to surveillance ads as part of the admission ‘price’ for its social networking services.
The EU announced the launch of a formal DMA investigation into Meta’s implementation of a “pay or agree” offer for users 25 March — following months of criticism from privacy advocacy and consumer protection groups, who also argue that the subscription does not comply with the group’s data protection or consumer protection rules.
In March the Commission, which is the sole enforcer of the DMA, said it was concerned the binary choice presented by Meta – whereby users of its social network are asked to either agree to their tracking and profiling so it can continue to deliver micro-targeted advertising, or pay around €13 a month (per account) for access to ad-free versions of the services – may not provide a “real choice” for users who do not consent to being able to collect and combine their data for advertising.
The EU’s goal with the DMA is to level the competitive playing field by targeting various advantages that gatekeepers may exploit due to their dominance – including in the area of data.
In Meta’s case, a dominant position in social networking means the ability to extract more data from web users in order to profile them – giving its advertising unit an unfair advantage over competitors, according to the EU. Its tool for resetting the dynamic is a requirement in the DMA that gatekeepers obtain people’s permission for ad tracking. Its case against Meta is that the adtech giant has failed to offer people a free and fair option to refuse tracking.
Reporting its preliminary findings on Monday, the commission wrote: Press release The binary option offered by Meta “forces users to consent to the combination of their personal data and fails to provide them with a less personal but equivalent version of Meta’s social network”.
In a briefing with journalists ahead of the announcement, senior Commission officials stressed that while Meta’s social networking services are free to the public, it also offers an equivalent version for users who do not want to consent to its tracking.
The relevant DMA here is Article 5(2), which requires gatekeepers to obtain users’ consent to combine users’ personal data between designated core platform services (CPS) and other services.
Both of Meta’s social networks, Facebook and Instagram, and its advertising business are designated as CPS. September 2023 – This means the ad tech giant will have to get permission from users to track and profile their activity to deliver what it calls “personalized” advertising.
Users who refuse Meta’s tracking have a legal right to access a less personalised but equivalent alternative and the Commission’s preliminary view, following nearly three months of investigation, is that Meta is in breach of this requirement, as paid subscriptions are not a legitimate equivalent to free access.
The regulation also provides that gatekeepers cannot access a service or certain functionalities without the user’s consent.
Meta spokesperson Matthew Pollard sent us an email responding to the EU’s findings, attributed to a company spokesperson. In it, Meta reiterates its defense of the approach, citing an earlier EU court ruling – writing: “Ad-free subscriptions follow the highest court directive in Europe and comply with the DMA. We look forward to further constructive dialogue with the European Commission to conclude this investigation.”
Senior Commission officials were asked about this defence during a press briefing today. The EU explained that Holocaust Meta is referring to the court’s rejection of a suggestion that a paid version of a service could be offered as an alternative to tracking ads – saying a “reasonable fee” could only be charged “if necessary”.
In the context of DMA, the block’s promoters say that the gatekeeper will therefore have to argue why the fee is necessary. And the EU pointed out that in the case of Meta it can Offer an equivalent alternative to a full consent service, including advertising that does not rely on the processing of any personal data for targeting – such as contextual advertising.
Meta never explained why it decided not to offer users a free contextual advertising option — and why it opted for a binary “pay or agree” demand instead.
But it looks like the EU is on its way to forcing Meta to provide a non-binary, privacy-safe alternative in the coming months.
“To ensure compliance with the DMA, users who do not give consent should also have access to an equivalent service that makes less use of their personal data, in this case for the personalisation of advertising,” the Commission said in a press release.
Commission officials also say that Meta can still offer a subscription option – but they stress that any paid option must be an additional offer (i.e. a third option etc.) – i.e. on top of a non-paid counterpart that does not seek consent from users for its tracking.
The EU investigation is not over yet. And Meta will now have a chance to formally respond to the initial findings. But there is a limited time limit to things here: the bloc has set itself a 12-month deadline to complete the investigation – which suggests it must complete the work on or before March 2025.
The European consumer organisation BEUC welcomed the preliminary findings and urged the EU to implement them quickly.
“It is good news that the Commission is taking enforcement action based on the Digital Markets Act against Meta’s payment or consent model. This comes on top of complaints against Meta’s model for breaches of consumer law and data protection law, which Issues raised by consumer organisations in the last few months”We now urge Meta to comply with the laws designed to protect consumers,” BEUC Director General Agustin Reyna said in a statement.
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