Meta Accused of Violating EU Antitrust Rules Over Pay-or-Get Model (NASDAQ:META)

Update: EU law breach confirmed; EC statement added

Meta, the parent service of Facebook (NASDAQ:META) was accused by EU regulators on Monday of violating groundbreaking EU digital rules.

In March, the European Commission opened an investigation into Apple’s non-compliance with regulations (AAPL), Alphabet (GOOGLE) (GOOG) Google and Meta Platforms (FINISH) for potential violations of the Digital Markets Act (DMA).

In the case of Meta (META), non-compliance investigations were related to the social network’s “payment or consent model.”

The Commission today informed Meta (META) of its preliminary findings that its “pay or agree” advertising model does not comply with the Digital Markets Act (DMA).

Meta (META) introduced an ad-free subscription service for Facebook and Instagram in Europe late last year to comply with changing European regulations, allowing users to opt out of the company’s data tracking for advertising purposes. In the meantime, users who opt in to tracking get the service for free.

“The Commission’s preliminary position is that this binary choice forces users to consent to the combination of their personal data and does not provide them with a less personalised but equivalent version of Meta’s social networks,” the official statement reads.

Meta (META) now has the opportunity to exercise its right to defend itself by examining the documents in the commission’s investigation file and providing a written response to the commission’s preliminary findings.

The Commission will complete its investigation within 12 months of the date of initiation of the proceedings, which occurred on 25 March 2024.

If a company is found to be in breach of the Act, it faces severe penalties of up to 10% of its global turnover, and in the event of repeat offences – up to 20%.

“Our investigation aims to ensure competition in markets where gatekeepers like Meta have been collecting the personal data of millions of EU citizens for many years. Our preliminary view is that Meta’s advertising model is not compliant with the Digital Markets Act. We want to empower citizens to take control of their own data and opt for a less personalised advertising experience,” said Margrethe Vestager, Executive Vice President, Competition Policy.

The report comes after EU antitrust regulators filed a similar case against Apple (AAPL) last week. The European Commission found that Apple’s App Store rules violate the DMA because they prevent app developers from directing consumers to alternative channels for offers and content.