EU: Meta’s ad-free subscription violates competition law

When Meta introduced a subscription option last year that allowed users in the European Union to pay for an ad-free experience on Instagram and Facebook, it was intended to address regulatory issues the company faced in the region.

However, the plan raised new legal problems.

On Monday, European Union regulators said Meta’s subscription, which costs up to 12.99 euros per month, amounted to a ‘pay or consent’ scheme which required users to choose between paying a fee or handing over more personal data to Meta to use for targeted advertising.

Meta introduced the subscription last year as a way to address legal and regulatory scrutiny of its ad-based business model. The biggest concern was the combination of data collected about users on its various platforms, including Facebook, Instagram and WhatsApp, along with information pulled from other websites and apps.

Meta argued that by offering a subscription, users had a fair alternative.

But regulators said Monday that the system wasn’t a choice at all, forcing users to pay for privacy. Authorities said Meta’s policies violated the Digital Markets Act, a new law aimed at reining in the power of the biggest tech companies.

The law, known as the DMA, is intended to prevent big tech companies from using their size to force users to accept terms of service they would otherwise reject, including the collection of personal data. The concern was that platforms like Instagram and Facebook are so widely used that people have to choose to transfer their data or opt out altogether.

Regulators said the law required companies to give users the ability to opt out of having their personal data collected while still giving them a “less personal but equivalent alternative” to the service.

“Meta’s ‘pay or consent’ business model is at odds with the DMA,” said Thierry Breton, the European commissioner who helped draft the law. “The DMA is here to give users back the power to decide how their data is used and to ensure that innovative companies can compete on an equal footing with tech giants when it comes to data access.”

In a statement, Meta said the subscription service complied with the Digital Markets Act and that it would work with European regulators to complete the investigation.

Last week, Nick Clegg, the chairman of Meta, said that Europe fall behind economically due to overregulation. “The complexity of European regulations and the patchwork of laws in the various member states mean that companies are often hesitant to roll out new products here,” he says.

Monday’s announcement is one step in a longer process. The European Commission, the executive arm of the 27-nation bloc, has until March to complete its investigation. If found guilty, Meta could face fines of up to 10 percent of its global revenues, and up to 20 percent for repeat violations.

Meta is the second company to be charged under the Digital Markets Act. Last week, the commission sued Apple for unfair trade practices related to the App Store.

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