The European Commission has told Meta its ‘pay or consent’ model for personalized ads is in breach of the Digital Markets Act (DMA).
Under the DMA, users should be given a choice on whether their data can be collected and used for targeted ads.
Since November last year, the company has attempted to claim it is compliant by offering Facebook and Instagram users in the EU the choice of agreeing to accept tracking and targeting, or of paying a monthly subscription for an ad-free version of the platforms.
However, following an investigation, the Commission said its preliminary view is that giving users this binary choice forces them to accept the data collection, by failing to give them an equivalent service if they decline.
"Today we make another important step to ensure full compliance with the DMA by Meta. Our preliminary view is that Meta’s Pay or Consent business model is in breach of the DMA," said Thierry Breton, commissioner for internal market.
"The DMA is there to give back to the users the power to decide how their data is used and ensure innovative companies can compete on equal footing with tech giants on data access."
Meta has been classified under the DMA as one of a number of 'gatekeepers', meaning it’s subject to more stringent rules. These gatekeepers, according to the Commission, have been able to impose terms of services on their user base that allows them to collect vast amounts of personal data.
This has given them potential advantages compared to competitors, making it hard to compete in terms of providing online advertising and social network services.
As such, firms such as Meta are required to gain users' consent for combining their personal data between designated core platform services and other services; and if a user refuses consent, they should have access to a less personalized but equivalent alternative.
Gatekeepers can't make use of the service or certain functionalities conditional on users' consent.
Meta's policy, the Commission said, fails to allow users to opt for a service that uses less of their personal data but is otherwise equivalent to the personalized ads-based service. Nor does it give users a free choice when it comes to consenting to the combination of their personal data.
"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 Margrethe Vestager, executive vice-president in charge of competition policy.
"We want to empower citizens to be able to take control over their own data and choose a less personalized ads experience."
Meta ruling has been welcomed by industry stakeholders
The Commission's verdict has been welcomed by the European Consumer Organisation (BEUC), which late last year submitted a formal complaint to European consumer protection authorities.
"It’s good news that the Commission is taking enforcement action based on the Digital Markets Act against Meta’s pay-or-consent model," said BEUC director general Agustin Reyna.
"It comes on top of the complaints against Meta’s model for breaches of consumer law and data protection law which consumer organizations have raised in the last few months. We now urge Meta to comply with laws meant to protect consumers."
Meta can now reply to the findings, and the Commission is expected to complete its investigation by the end of March next year.
If the preliminary view is confirmed, the company could, in theory, be subject to fines up to 10% of the company's total worldwide turnover - or even 20% in the case of repeated infringement.
