Recently, Facebook’s parent company Meta has come under fire from EU regulators for allegedly failing to comply with the bloc’s landmark antitrust rules. The core of the accusations revolves around Meta’s introduction of an ad-supported subscription model for its social networking services. This model, termed as a “pay or consent” approach, essentially forces users to choose between paying for an ad-free experience or consenting to have their data processed for personalized advertising. The European Commission has criticized this binary choice, arguing that it restricts users’ autonomy and doesn’t offer them a less personalized but equivalent option for using Meta’s platforms.
In response to the allegations, a Meta spokesperson defended the company’s ad-supported subscription model by stating that it aligns with the expectations set by the highest court in Europe and is in compliance with the Digital Markets Act (DMA). Meta had introduced this new model following a ruling from the European Court of Justice, which emphasized the possibility of offering an “alternative” service that doesn’t rely on extensive data collection for advertising purposes. However, the Commission’s preliminary findings suggest that Meta’s offering still falls short of meeting the DMA requirements, primarily due to the absence of a less intrusive data collection option for users and the limitation in freely consenting to data usage for targeted ads.
The EU’s Digital Markets Act, which became enforceable earlier this year, aims to crack down on anti-competitive behaviors from major digital companies like Meta. The law empowers regulators to impose hefty fines on companies found to be in violation of the DMA, with penalties potentially reaching up to 10% of the global annual revenue. In the case of repeated breaches, the fine could escalate to 20% of the total revenue. For Meta, if the Commission’s final findings confirm the violation, the company could face a penalty as high as $13.4 billion based on its projected annual earnings for 2023.
Following the release of the EU’s preliminary findings, Meta now has an opportunity to present its defense in writing. The ongoing investigation, initiated by the European Commission in March along with similar probes into tech giants Apple and Alphabet, is expected to conclude within 12 months from the commencement of the proceedings. This signifies a critical period for Meta as it navigates the regulatory scrutiny and seeks to address any potential compliance shortcomings identified by the EU regulators.
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