Meta’s ‘pay or consent’ model fails to comply with the DMA, Commission finds

The European Commission has determined that Meta Platforms Inc., the parent company of Facebook and Instagram, has violated the EU’s Digital Markets Act (DMA) with its controversial “pay or consent” model. The model, introduced last November, offers users a binary choice: agree to data tracking for targeted ads or pay a subscription fee for an ad-free experience.

The Commission’s preliminary findings, released today, indicate that Meta’s approach does not comply with the DMA, which has been in effect for gatekeepers like Meta since March 7. The DMA aims to ensure market contestability and fairness by regulating the practices of dominant tech companies. Penalties for non-compliance can be severe, reaching up to 10% of a company’s global annual turnover, or 20% for repeat offenses.

Meta’s model has faced significant backlash from privacy advocates and consumer protection groups, who argue that it forces users into accepting invasive data tracking as the price for using social networking services. The EU’s investigation into Meta’s practices, announced on March 25, followed months of criticism and highlighted concerns that the choice offered by Meta does not provide a genuine alternative for users who prefer not to have their data collected for advertising purposes.

The Commission’s findings emphasize that the DMA is designed to level the playing field in the digital market, targeting the undue advantages that gatekeepers can exploit due to their market dominance. For Meta, this dominance in social networking allows it to amass vast amounts of user data, giving its advertising business a competitive edge. The DMA mandates that gatekeepers must obtain explicit consent from users before combining their personal data across different services.

Senior Commission officials, in a briefing with journalists, stressed that as long as Meta offers its social networking services for free, the equivalent ad-free versions must also be accessible without cost to users who opt out of tracking. This requirement is grounded in Article 5(2) of the DMA, which compels gatekeepers to seek user consent for data combination across core platform services (CPS) and other services.

Since September 2023, both Facebook and Instagram, along with Meta’s advertising business, have been classified as CPS under the DMA. This classification obliges Meta to obtain user permission before tracking and profiling their activities to serve personalized ads.