The European Union (EU) has accused Meta Platforms Inc (NASDAQ:META), the parent company of Facebook and Instagram, of violating its new Digital Markets Act (DMA), shortly after launching a similar case against Apple.
The DMA, which is enforced by the European Commission, aims to enhance consumer choice and support European start-ups and requires compliance from major tech companies.
For big tech companies that do not comply, the EC can impose fines up to 10% of worldwide turnover, rising to 20% in case of repeated infringement.
Today, the EC said it had informed Meta of its preliminary findings, which are that its 'pay or consent' advertising model "fails to comply" with the DMA.
"This binary choice forces users to consent to the combination of their personal data and fails to provide them a less personalised but equivalent version of Meta's social networks," the EC said.
Under the pay-or-consent model, users either allow data collection for free use of Facebook and Instagram or pay to avoid data sharing.
The "Pay or Consent" advertising model of Meta fails to comply with the Digital Markets Act.
Our preliminary findings show that this choice forces users to consent to the combination of their personal data and fails to provide them a less personalised but equivalent version of… pic.twitter.com/KJPNfQ71a1
— European Commission (@EU_Commission) July 1, 2024
The EC noted that online platforms like Facebook and Instagram collect vast amounts of personal data to provide online advertising services, with the dominant position of 'gatekeepers' like Meta allowing them to impose their terms of services on their large user base.
"This has given them potential advantages compared to competitors who do not have access to such a vast amount of data, thereby raising high barriers to providing online advertising services and social network services," the EC said.
Meta last November introduced the binary offer whereby EU users of Facebook and Instagram have to choose to pay a monthly subscription for an ad-free version of these social networks or to access the social networks for free but with personalised ads.
The EC said its preliminary view is that Meta's this 'pay or consent' model is not compliant with the DMA as it does not allow users to opt for a service that uses less of their personal data but is otherwise similar, nor allow users to consent to the combination of their personal data.
"To ensure compliance with the DMA, users who do not consent should still get access to an equivalent service which uses less of their personal data, in this case for the personalisation of advertising," the preliminary ruling stated.
Meta defended its model, claiming it aligns with European court rulings and DMA requirements, and expressed willingness to engage with the Commission.
The EU's findings must be finalized within a year from the investigation's initiation in March.