Mark Zuckerberg's Meta faces EU charges for Digital Markets Act breach

After Apple, the European Commission is preparing to charge Meta, the parent company of Instagram and Facebook for its 'pay or consent' model

The European Union is preparing to charge Meta, Facebook’s parent company, with violating the bloc’s new digital regulations, just one week after launching a similar case against Apple, according to a report by the Financial Times (FT).

As of March this year, tech giants like Meta and Apple were required to comply with the Digital Markets Act (DMA), which came into effect in March this year. The European Commission, the EU’s executive body, drafted this legislation to enhance consumer choice and foster opportunities for European start-ups.

Meta’s ‘pay or consent’ model under EU scrutiny

The Commission’s preliminary findings, expected this week, suggest concerns over Meta’s ‘pay or consent’ model, FT noted.

Currently, Facebook and Instagram users can either use the platforms for free while allowing data collection or pay to avoid data sharing. Regulators fear this model presents consumers with a misleading choice, potentially coercing them into consenting to data tracking due to the financial barrier.

The DMA mandates that tech companies must obtain user consent when combining or cross-using personal data across different core platform services. With Meta’s model, users may be forced into accepting data collection, without any ‘equivalent offer’ available.

Responding to the allegations, Meta told the FT, “Subscription for no ads follows the direction of the highest court in Europe and complies with the DMA. We look forward to further constructive dialogue with the European Commission to bring this investigation to a close.”

What will happen if Meta is found in breach of DMA?

The EU’s preliminary findings must be finalised within a year from the start of the official investigation in March.

If found in breach of the DMA, Meta could face substantial penalties, up to 10 per cent of its global turnover, and up to 20 per cent for repeat offences.

What is the Digital Markets Act (DMA)?

The Digital Markets Act or DMA sets clear criteria to identify large online platforms as ‘gatekeepers’ and ensures their fair conduct online, to enhance competition. This Act is a key part of the European digital strategy.

The DMA aims to benefit businesses by creating a fairer environment, offering innovators and start-ups more opportunities to compete, and providing consumers with better services, more choices, and fairer prices. Gatekeepers can still innovate and offer new services but must avoid unfair practices that disadvantage dependent businesses and customers.

‘Gatekeepers’ are major digital platforms offering services like online search engines, app stores, and messaging services. These companies have a strong economic presence, significant market influence, and operate in multiple EU countries. They also hold a stable, enduring market position over time.

On 6 September 2023, the European Commission designated six gatekeepers: Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft, covering 22 core platform services.

Apple’s app store rules violate EU’s DMA

Last week, the EU accused Apple of stifling innovation on its App Store. The charge against Apple was the first under the DMA. The final decision is due by March next year. EU antitrust chief Margrethe Vestager raised concerns about Apple’s new terms, stating they restrict app developers from freely communicating with users and concluding contracts.

The Commission criticised Apple’s requirement for ‘link-outs’, which only allow developers to redirect customers to a web page to complete contracts. Additionally, it highlighted excessive fees charged by Apple for new customer acquisitions via the App Store.

Apple has denied these allegations. The tech giant responded by stating it had made several changes to comply with the DMA based on feedback from developers and the Commission. The company expressed confidence in its compliance and estimated that over 99 per cent of developers would pay the same or lower fees under the new terms.