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EU: Meta’s ‘Pay or Consent’ Model Fails

Meta’s “pay or consent” policy for Facebook and Instagram users in Europe violates the Digital Markets Act (DMA)
July 2, 2024

In a significant move, the European Commission has found that Meta's "pay or consent" policy for Facebook and Instagram users in Europe may violate the Digital Markets Act (DMA). According to preliminary findings, the binary choice offered by Meta—either consenting to personal data tracking or paying for an ad-free experience—does not comply with EU regulations aimed at protecting consumer rights and data privacy.

The European Commission's investigation into Meta's practices has raised serious concerns about the company's approach to user consent and data tracking. Meta's current policy forces users to either allow their data to be used for targeted advertising or pay a monthly fee of nearly €13 for an ad-free version of its services. This approach, according to the Commission, fails to provide users with a genuine alternative that respects their privacy.

Non-compliance with the DMA could have severe financial repercussions for Meta. Penalties for confirmed breaches could reach up to 10% of the company's global annual turnover, and up to 20% for repeat offenses. More importantly, the Commission's findings could force Meta to rethink its entire business model, which relies heavily on surveillance advertising.

Meta's policy has faced intense scrutiny and opposition from privacy advocacy and consumer protection groups across Europe. These groups argue that a subscription model does not align with the bloc's stringent data protection and consumer protection regulations. In March, the European Commission launched a formal investigation into Meta's practices, following months of lobbying from these organizations.

The core issue at hand is Meta's dominant position in the social networking market, which the Commission believes allows the company to collect vast amounts of data to gain an unfair advantage in the advertising sector. The DMA mandates that gatekeepers like Meta must obtain explicit consent from users before tracking their data for advertising purposes. The Commission's preliminary findings suggest that Meta's current practices do not meet this requirement.

In response to the EU's findings, Meta defended its approach, citing an earlier EU court judgment that appeared to support the idea of a paid, ad-free version of its services. However, the Commission pointed out that this judgment included caveats, suggesting that a fee could only be charged if necessary and that Meta should provide a free, less personalized alternative, such as contextual advertising.

Despite the ongoing investigation, the European Commission has made it clear that Meta must offer a non-binary, privacy-safe choice for its users. This means providing access to a service that uses minimal personal data while still offering the option of a paid subscription for those who prefer an ad-free experience.

The outcome of this investigation could set a precedent for how major tech companies handle user data and consent. If the Commission's findings lead to stricter enforcement of the DMA, other tech giants could also be compelled to revise their data practices. For now, Meta has a limited window to respond formally to the preliminary findings, with the investigation set to conclude by March 2025.

Consumer organizations, such as BEUC, have welcomed the Commission's preliminary findings and are calling for swift enforcement. Agustin Reyna, BEUC's director general, emphasized the importance of protecting consumers and ensuring that companies like Meta comply with laws designed to safeguard privacy and data rights.

As the European Commission moves forward with its investigation, the tech industry will be closely watching to see how this landmark case unfolds and what it means for the future of digital advertising and data privacy.

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