Meta accused of breaking European law with its ‘pay or consent’ model

By Olesya Dmitracova, CNN

London CNN  —  Facebook parent Meta has been accused of breaking Europe’s new digital competition rules over its “pay or consent” advertising model.

Late last year, Meta (META) launched a service called “Subscription for no ads,” allowing European users of Facebook and Instagram to pay up to €12.99 ($14) a month for ad-free versions. The alternative is to accept versions with personalized ads.

The European Commission said in a statement Monday that, in its preliminary view, “this binary choice forces users to consent to the (use) of their personal data and fails to provide them a less personalized but equivalent version of Meta’s social networks.”

If the provisional findings of the Commission’s investigation are confirmed, the EU could hit Meta with a fine equivalent to 10% of its global annual revenue under its landmark Digital Markets Act. Based on the company’s 2023 results, that would amount to $13.5 billion.

Meta said it didn’t accept the Commission’s findings.

“’Subscription for no ads’ follows the direction of the highest court in Europe and complies with the DMA,” a spokesperson told CNN. “We look forward to further constructive dialogue with the European Commission to bring this investigation to a close.”

The EU announcement comes a week after the Commission accused Apple (AAPL) of breaching the DMA by preventing app developers from freely directing consumers to cheaper services. The regulators are also investigating Google parent Alphabet (GOOGL) under the new law.

The DMA, which came into force in March, requires dominant online platforms — so-called gatekeepers — to give users more choice, and rivals more opportunities to compete. Online platforms often collect personal data across their own and third-party services and use it in digital advertising services.

Margrethe Vestager, a European Commissioner in charge of competition policy, noted in Monday’s statement that Meta had been accumulating personal data of “millions of EU citizens over many years.”

“We want to empower citizens to be able to take control over their own data and choose a less personalized ads experience,” she said.

Michael Koenig, a senior official at the Commission, said Meta must offer users an alternative to “full” ad personalization that “does not rely on this personal data and which is then automatically less personalized and still available to them.”

“Then Meta is free to keep a third option, which is a subscription not to see ads at all, or a fourth option which may have some premium features,” he told journalists.

The Commission is due to conclude its probe into Meta by late March next year.

This article has been updated with additional information.

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