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Meta Platforms Inc. faces scrutiny over its ad-free subscription model for Instagram and Facebook, posing a risk of substantial fines in the European Union’s intensified regulatory push against major tech companies. EU regulators announced that Meta's current "pay-or-consent" policy breaches the Digital Markets Act (DMA) by coercing users into consenting to data combination without offering a less personalized alternative for both platforms.
Margrethe Vestager, the EU’s antitrust chief, stated, "Our preliminary view is that Meta’s advertising model fails to comply with the Digital Markets Act. We want to empower citizens to take control over their own data and choose a less personalized ads experience." The DMA outlines stringent rules for some of the world’s largest tech firms. Penalties for non-compliance can reach up to 10% of global annual revenue, or 20% for repeated infractions.
Meta introduced separate, ad-free versions of its platforms in November to mitigate regulatory scrutiny over their data processing practices. The company asserted that its new model adheres to the DMA, expressing readiness for further discussions with the European Commission to resolve the investigation. Following the announcement, Meta shares experienced a 1.3% decline in New York trading, while the Russell 3000 Index Computer Services Subsector showed gains.
The DMA mandates that Big Tech companies secure users’ consent for data amalgamation across services. Should users reject consent, access to a less personalized version must be provided. The EU Commission emphasizes that companies like Meta cannot enforce the use of their services based on user consent.
This regulatory challenge for Meta arrives shortly after the EU addressed Apple Inc.'s compliance with the DMA, instructing the iPhone maker to enable app developers to offer cheaper deals outside of the App Store. The DMA prohibits companies like Apple, Google, Meta, Microsoft, and Amazon from favoring their own services over competitors, combining personal data across services, utilizing third-party merchant data to outcompete them, and requires allowance for users to download apps from rival platforms.
