European Commission Targets Meta's Ad Practices Under Digital Market Act: Potential Fines and Compliance Reforms Loom

A Question of Privacy Compliance: EU's Preliminary Finding against Meta

Recent preliminary findings suggest that Meta's controversial binary choice platform, applicable in Europe across Facebook and Instagram, is in conflict with the European Commission's Digital Market Act (DMA). An initial investigation indicates that Meta may be failing to provide a genuine alternative to its microtargeted advertising for users unwilling to consent to data collection. This revelation can possibly lead to substantial penalties, such as fines amounting to 10% of global yearly revenue or even 20% for repeated offenses.

As an ex-ante market contestability regulation, the DMA has implications for prominent tech businesses like Meta. More importantly, enforcing the DMA could cause Meta to change their current approach, which has been critiqued for its overt focus on surveillance advertising.

The ramifications for Meta are significant, given that the findings were by the Digital Market Act (DMA) authorities. Being the sole enforcer of the DMA, the European Commission voiced concerns over Meta's enforced consent to data collection, despite noting that paying for an ad-free service is not an equivalent alternative to free access.

Equal Services, Equal Access

The Commission made it clear that as long as social networking services are free to the public, then the equivalent version for users opting out of tracking should also be free. A stipulation in the DMA, Article 5(2), requires such “gatekeeper” platforms to seek user consent for combining personal data across core platform services (CPS) and other services.

As such, the free or ad-free options that Meta presents to its users are legally seen as equivalent services. However, the DMA insists that service usage or certain functionalities must not be dependent on user consent. The Commission believes that Meta's failure to offer a free alternative to users who object to tracking contradicts this directive.

In Defense of Meta

In response to the EU's allegations, Matthew Pollard, a spokesperson for Meta, insists that their subscription-based, ad-free model aligns with a prior EU court ruling, asserting their willingness to cooperate with the EU in order to conclude the investigation.

However, the EU refused Meta's defense, pointing out that the referred judgment suggests that offering a paid service as an alternative to tracking ads is only permissible if a fee is deemed necessary. Consequently, tech giants like Meta must provide an argument supporting the need for a fee. The EU further adds that Meta could have offered a complementary alternative that does not rest on the processing of personal data, such as contextual advertising, raising questions over why Meta chose a "pay or consent" model.

Even though the EU's probe is yet to conclude, its preliminary findings may dictate the future direction for Meta. A tightened timeline, ending in March 2025, makes it mandatory for the investigation's conclusion to happen by then.

The European consumer organization, BEUC, met the initial findings with favor, encouraging swifter enforcement and urging Meta to adhere to laws intended to protect consumers.