EU Warns Meta Over Facebook’s ‘Free’ Claims, Threatens Fines

European Union regulators have alerted Meta, the parent company of Facebook and Instagram, that its “pay or consent” model for those social networks may breach consumer protection laws. Meta has until September 1, 2024, to revise this approach, which the EU describes as potentially misleading, or face possible monetary penalties. I reported earlier this month that the EC was ready to open a probe into Meta’s model. Now just a few weeks later, the Commission has made its investigation public and official.  Concerns About Consumer Protections The “pay or consent” model, introduced by Meta in 2023, allows users to either pay up to €12.99 per month for an ad-free experience or agree to have their data collected for personalized ads. The EU has raised concerns over privacy implications and possible user confusion. Previously, Meta had been fined under the General Data Protection Regulation (GDPR) for transferring user data overseas. Consumer advocacy groups led to an investigation by Consumer Protection Cooperation (CPC) regulators, who argue that Meta’s explanation of their model is ambiguous. They claim the rollout pressured users into making decisions without fully understanding the implications. Regulators contend that referring to the ad-supported versions as “free” is misleading, as users must agree to data usage for targeted advertising. Statements from Officials and Meta EU Commissioner for Justice, Didier Reynders, emphasized the need for transparency regarding data usage and warned against misleading users into believing a subscription would eliminate ads or that the service is truly free. Meta spokesperson Matt Pollard, via email, told The Verge asserted that their subscription approach complies with European regulations and aligns with the highest court in Europe’s direction. He noted that subscriptions in exchange for an ad-free experience are common across many industries. The CPC has accused Meta of violating the Unfair Commercial Practices Directive and the Unfair Contract Terms Directive. Violation penalties could reach up to 4 percent of Meta’s annual revenue within the affected EU countries. Wider Regulatory Context Besides GDPR, the Digital Markets Act (DMA) is also at play in this case. The DMA demands explicit user consent before tech firms can blend or use personal data across different services. The Commission’s issue lies with Meta’s necessity to provide its services freely, sans personalized ads, if users decline data use for such ads. Meta is a gatekeeper under the DMA laws, meaning the company must uphold certain regulatory standards. Deadline and Possible Outcomes A guilty verdict could result in substantial financial penalties for Meta and necessitate modifications to its data management protocols. The case highlights the European Union’s strict approach to enforcing data privacy regulations, potentially establishing a new benchmark for data handling practices among large technology corporations. Meta has indicated its intention to fully cooperate with the investigation as it reviews the allegations.