EU Commission deems Meta's ad-free subscription non-compliant

Meta's strategy to let EU users opt out of ads and data tracking, in line with evolving EU regulations, could potentially incur significant penalties.

The EU Commission has determined that Meta's ad-free subscription plan does not comply with the Digital Markets Act (DMA), which is designed to give European social media users greater control over their personal data. Meta introduced this ad-free subscription service in Europe last November, allowing users to opt out of ads and data tracking for €9.99 per month. This approach was intended to offset the loss of ad revenue with direct user payments, thereby adhering to the new law while offering an option to avoid data tracking.

However, privacy advocates argue that Meta's proposal undermines the General Data Protection Regulation (GDPR) and its protections against ‘data capitalism.’ Consequently, the European Data Protection Board called for an investigation into the plan's compliance with the new laws, resulting in the finding that Meta is in breach of the DMA. If upheld, this could result in fines of up to 10% of Meta's global revenue.

The EU Commission stated that Meta's ‘pay or consent’ advertising model does not comply with the DMA, as it fails to meet the requirements outlined in Article 5(2). Specifically, Meta's model does not offer a service that uses less personal data but is otherwise equivalent to the personalized ads-based service and does not allow users to freely consent to the combination of their personal data.

The crux of the issue is that Meta charges users to access its apps without data tracking, which the EU Commission claims violates DMA regulations that mandate users should be able to access the same experience without submitting personal data.

This ruling could be legally challenged, as it raises concerns about business losses and the impact on a company's ability to operate under these new regulations. Meta might argue that it shouldn't be financially penalised for providing an ad-free option, as the removal of detailed ad targeting impacts its ad performance and partnerships. The subscription model, while offering a revenue stream, does not compensate for the potential ad revenue loss per user.

Despite offering a cheaper version of its ad-free subscription to appease EU regulators, the Commission's stance could force Meta into a situation where it loses income to comply with the rules. While it remains uncertain if this will withstand legal scrutiny, the EU Commission has already supported the challenge, which may not bode well for Meta's case.

Ultimately, Meta's ad-free subscription offering may soon be withdrawn in the EU, though the company might avoid penalties by demonstrating its efforts to comply with the requirements in good faith. Nonetheless, this could be a costly development for Meta. The outcome remains to be seen.