European Commission accuses Meta of violating digital competition rules with ‘pay or OK’ model

4 months ago 22

The European Commission accused Meta of violating its digital competition rules, the Digital Markets Act (DMA), in its “pay or OK” model, officials told Euractiv on Monday (1 July).

The model, introduced in November 2023, gives users in the EU a choice between consenting to using their personal data for targeted advertising or paying for an ad-free experience on Meta platforms.

Meta does not give users the option of ads that use less personalised data in its “pay or OK” model, neither does it allow users to freely consent to the use of their personal data, so it might be in breach of the DMA, according to the Commission’s preliminary findings.

“For there to be a free choice for the user and a valid choice for the user […] the consumer needs to be in a position to choose an alternative version of the service which relies on non–personalisation of the ads,” said an official in a Monday briefing.

The company can defend itself and the investigation is expected to conclude in March 2025, officials said.

Fines for breaching the DMA can reach 10% of the company’s annual turnover. Meta’s total revenue in 2023 was $134.9 billion (€125.3 billion).

“Subscription for no ads follows the direction of the highest court in Europe and complies with the DMA,” a Meta spokesperson told Euractiv on Monday, referring to a decision by the Court of Justice in the EU.

The court said that a company can decide to charge a fee for users looking for a service without data processing.

However, officials said this does not negate the DMA’s obligation to offer a service that utilises less personal data on an equivalent basis to the personalised ads service.

The Commission opened an investigation into Meta’s “pay or OK” model on 25 March.

Meta, which owns Facebook, Instagram, and WhatsApp, has been designated a gatekeeper under the DMA, so it has to follow strict rules to allow competition.

Under the DMA, gatekeepers must seek user consent for combining their personal data between designated core platform services, in this case Facebook, Instagram, and WhatsApp, and other services, the Commission said in a Monday press release.

If a user refuses such consent, they should have access to a less personalised but equivalent alternative, said the press release.

Adding a third option, which would allow users to see non-personalised ads on an equivalent basis as the personalised ads service, would work for the Commission, the executive said.

The Commission official hinted that such an option should be free to ensure compliance: “The situation that the fully consented version is offered for free plays a very important role.”

“The DMA isn’t about whether there is advertising or not on a service. It is about the amount and the type of data which is available for this advertising. That means there are other forms of advertising, which do not rely on your full personal information being shared,” said an official.

Gatekeepers can impose terms of service on their user bases, which allows them to collect large amounts of data, the Commission said in a statement. This, in turn, gives them an advantage over their competitors, thus raising the barrier to entry into the social networking market, the EU executive said.

Following the announcement of investigations in the spring, the Commission is now releasing such “preliminary findings.” Last week, it accused Apple of violating the DMA with its App Store.