‘Pay or consent’: Meta faces billions in fine over new ad-free subscription model

Key Points

• Meta’s “pay or consent” model under fire by EU.
• EU claims model violates Digital Markets Act (DMA).
• Model forces users to choose between data collection and paid ad-free option.
• EU aims to give users more control over data and promote competition.
• Meta could face billions in fines if found guilty of DMA violation.

 

On Monday, the European Union accused Meta, the parent company of Facebook and Instagram, of violating the bloc’s digital regulations, which could lead to fines amounting to billions of euros. This charge comes on the heels of a recent decision against Apple, marking the first formal accusation under the EU’s Digital Markets Act (DMA).

The case centres around Meta’s new ad-free subscription model for Facebook and Instagram, which has raised significant privacy concerns. This “pay or consent” model forces users to either pay to avoid data collection or agree to share their data to continue using the platforms for free.

The European Commission informed Meta that its preliminary assessment found the model non-compliant with the DMA.

According to the Commission, this binary choice compels users to consent to data combination without providing a less personalised yet equivalent version of Meta’s social networks.

The probe into Meta, initiated in March under the DMA, aims to ensure that the world’s largest tech companies adhere to rules designed to offer European users more choices online. Meta maintains that its model aligns with the DMA, expressing a willingness to engage in further discussions with the European Commission to resolve the issue.

Also read: EU warns Apple against breaching digital competition rules amid Big Tech regulatory efforts

Should Meta fail to address the Commission’s concerns, it could face fines up to 10 per cent of its global revenue, which could double for repeat offences.

In 2023, Meta’s total revenue was approximately $135 billion (125 billion euros).

In extreme cases, the EU has the authority to dismantle companies, although this is considered a last resort.

EU’s Regulatory Crackdown

The DMA designates Meta and other major tech companies, including Apple, as “gatekeepers,” restricting them from forcing users to consent to data sharing to access services. The Commission highlighted that Meta’s model does not allow users to “freely consent” to data sharing between Facebook and Instagram with Meta’s ad services.

Also read: Microsoft faces EU antitrust charges for tying Teams to Office Suite

Commissioner Thierry Breton emphasised the DMA’s role in empowering users to control their data usage and ensuring fair competition among tech companies.

The Commission’s final decision on Meta’s compliance with the DMA is expected by late March 2025.

The EU’s commitment to regulating major online companies is evident in its recent actions.

Last week, the Commission informed Apple that its App Store rules were hindering developers from directing consumers to alternative offer channels. Google is also under scrutiny for similar issues with its Google Play marketplace.

In addition to Apple and Meta, other tech giants such as Google parent Alphabet, Amazon, Microsoft, and TikTok owner ByteDance must comply with the DMA. Online travel giant Booking.com will also need to adhere to the rules later this year.

Privacy Concerns and Regulatory Actions

Meta has profited immensely from using users’ data for targeted advertising, but it has faced numerous complaints regarding its data processing practices. In April, the European data regulator stated that Meta’s “pay or consent” model conflicts with the bloc’s General Data Protection Regulation (GDPR), which protects user privacy.

Ireland, a key hub for tech giants operating within the 27-nation bloc, has imposed substantial fines on Meta for GDPR violations. Recently, privacy groups’ complaints forced Meta to halt its plans to use personal data for training its artificial intelligence technology in Europe.

Subscribe to Notifications