Investors are staying on the sidelines amid a broad selloff in tech stocks this year. Shares of Facebook parent Meta have fallen more than 30% this year amid a troubled macroeconomic environment and weaker-than-expected results.
Igor Golovniov | SOPA Images | LightRocket | Getty Images
Parent company of Facebook After was accused on Monday by EU regulators of failing to comply with the bloc’s landmark antitrust rules on the newly introduced ad-supported social networking service.
The Commission characterized the ad-supported subscription option as a “pay or consent” model — meaning that users must either pay to use Meta’s platforms without ads or consent to the processing of their data for personalized advertising. The service was introduced for Facebook and Instagram in Europe last year.
“In the Commission’s preliminary view, this binary option forces users to consent to the combination of their personal data and fails to provide them with a less personalized but equivalent version of Meta’s social networks,” regulators said in a statement on Monday.
A Meta spokesperson told CNBC in a statement that the ad-supported subscription model “follows the highest court guidelines in Europe and complies with the DMA.”
“We look forward to further constructive dialogue with the European Commission to complete this investigation,” the spokesman added.
Meta introduced the new model in response to a ruling by the European Court of Justice, the EU’s highest court, last year that a company can offer an “alternative” version of its service that doesn’t rely on data collection for advertising.
Meta previously pointed to this decision as the reason for introducing the subscription offer.
In its statement on Monday, the Commission said that Meta’s ad-supported offering failed to comply with the DMA for two main reasons: one is that it does not allow users to choose a service that uses less personal data but is still equivalent to “Ad-based personalized service.
Regulators said users should still have the right “to access an equivalent service that uses less of their personal data, in this case to personalize advertising”.
The other reason cited by the EU is that the Meta ad-supported service does not allow users to exercise their right to “freely consent” to the use of their personal data to target online advertising.
Heavy fines are at stake
The EU’s Digital Markets Act, or DMA, officially became enforceable in March of this year. The law aims to curb anti-competitive practices by big digital companies, as well as force them to open up some of their services to competitors.
Companies can face potentially huge fines under the DMA and could end up paying up to 10% of their global annual revenue. For repeated violations, this percentage could rise to 20%.
In Meta’s case, if found to be in violation of the DMA in the Commission’s final findings, it could be fined as much as $13.4 billion, based on the company’s 2023 annual profit numbers.
After receiving the EU’s preliminary findings, Meta now has the opportunity to defend himself in writing.
The commission’s investigation, which began in March alongside two other investigations into tech giants Apple and Alphabet, will be completed within 12 months of the start of the process.
