Sunday, July 21, 2024

Meta’s Ad-Free Subscriptions For Instagram And Facebook Break Europe’s Tech Rules—Possibly Drawing Billions In Fines, EU Says

Must read

Topline

Facebook and Instagram parent Meta has flouted Europe’s tough digital competition rules by forcing users to “pay or consent” to sharing personal data, the European Commission said Monday, an infraction that could potentially cost the company billions of dollars—just a week after the powerful regulator targeted iPhone giant Apple for stifling competition.

Key Facts

The European Commission, the European Union’s executive arm as well as its tech and competition watchdog, said Meta’s so-called “‘pay or consent’ advertising model” falls foul of the bloc’s Digital Markets Act, which is designed to encourage competition in the tech sector and protect smaller companies from large platforms.

Meta introduced the model in late 2023 in response to regulatory changes in the EU, giving Facebook and Instagram users the option of paying nearly €13 (around $14) a month for ad-free versions or accepting a free account that runs personalized ads.

The Commission said Meta’s “binary choice” breaches DMA rules as it “forces users to consent to the combination of their personal data” and does not offer “a less personalized but equivalent version” of the company’s social networks.

Under the DMA, large tech platforms, termed gatekeepers, must seek consent before combining users’ personal data with core platform services and other offerings like ads, and should not make use of the service conditional upon consent and instead offer an equivalent, less personalized alternative for those who refuse.

The Commission said its findings are preliminary and Meta is able to examine the regulator’s investigation and defend itself in writing before a final decision is issued by March 25, 2025.

Meta did not immediately respond to Forbes’ request for comment.

Big Number

$135 billion. That’s how much Meta reported in revenue last year. A fine under the DMA, which caps out at 10% of global revenue for a first time infringement, could be as high as $13.5 billion.

Key Background

The European Union is one of the most powerful trading blocs in the world, and in recent years the Commission has set its sights on big, predominantly U.S., tech companies to level the playing field for smaller competitors. The DMA is the bloc’s flagship regime to ensure this, and it can both force significant change for companies wishing to operate in the EU and levy hefty fines for those refusing to play ball. Fines for breaches can be as high as 10% of annual global turnover, rising to 20% for repeat offenses. This can reach tens of billions of dollars for some of Silicon Valley’s biggest players, though enforcement of the bloc’s landmark data protection rules, GDPR, which can attract fines of 4%, suggests enforcement can be glacial and far less punitive than many had initially hoped. The regulator’s warning to Meta comes a week after it targeted iPhone maker Apple for its App Store policies, which the bloc said illegally stifled competition.

Crucial Quote

“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,” said EU antitrust chief Margrethe Vestager, an Executive Vice-President on the Commission. “We want to empower citizens to be able to take control over their own data and choose a less personalized ads experience,” Vestager said, adding that the Commission’s “preliminary view is that Meta’s advertising model fails to comply with the Digital Markets Act.”

Get Forbes Breaking News Text Alerts: We’re launching text message alerts so you’ll always know the biggest stories shaping the day’s headlines. Text “Alerts” to (201) 335-0739 or sign up here.

Further Reading

ForbesApple’s App Store Rules Illegally Stifle Competition In Europe-Possibly Drawing Billions In Fines, EU Regulator Says

Latest article