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Investors remain cautious amidst a widespread tech stock downturn this year, with shares of Meta, the parent company of Facebook, plummeting over 30% due to a challenging macroeconomic environment and disappointing financial results.
Meta has come under fire from EU regulators for allegedly breaching the bloc’s antitrust rules with its new ad-supported subscription service. The European Commission has criticized the service, labeling it a “pay or consent” model that requires users to either pay for an ad-free experience or consent to their data being used for personalized ads.
This model was introduced on Facebook and Instagram in Europe last year in response to a ruling from the European Court of Justice, which stated that companies must offer an alternative service that does not rely on data collection for advertising purposes.
However, the Commission’s preliminary assessment suggests that Meta’s offering forces users into a binary choice, violating their rights under the Digital Markets Act (DMA). Regulators argue that users should have access to an equivalent service that uses less personal data while still allowing for some level of personalization.
A Meta spokesperson defended the company’s approach, stating that it aligns with the direction of the highest court in Europe and complies with the DMA. The spokesperson also expressed a willingness to engage in further dialogue with the European Commission to resolve the issue.
The EU’s DMA, which became enforceable in March, aims to curb anti-competitive practices by large digital companies and mandate greater openness of their services to competitors. Companies found in violation of the DMA can face substantial fines, up to 10% of their global annual revenue, with potential increases to 20% for repeated breaches.
In Meta’s case, a breach of the DMA could result in a penalty as high as $13.4 billion, based on the company’s 2023 earnings. Meta now has an opportunity to respond to the EU’s preliminary findings in writing as the commission’s investigation continues. The inquiry, launched in March alongside probes into Apple and Alphabet, is expected to conclude within 12 months.