Meta Facing European Showdown on 'Pay-or-Consent' Ad Model
On Friday, the European Commission, the European Union's executive branch, warned Meta that it may start issuing daily fines, potentially amounting to more than $150 million a week, unless the Facebook and Instagram parent company properly complies with the DMA.
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Under the legislation, the EU can fine companies as much as 5 percent of their average daily worldwide turnover for violations. For Meta, which reported a global turnover of $164.5 billion in 2024, or around $450 million a day, a 5 percent daily fine would amount to $22.5 million. In practice, the EU rarely issues fines anywhere near the maximum allowed under the law.
At issue is Meta's so-called pay-or-play plan, under which users of Facebook or Instagram in the EU must either consent to allowing their data to be used for personalized ads, or pay a monthly subscription (starting at €9.99/$11.75) for an ad-free experience.
The European Commission has argued this all-or-nothing approach violates the DMA because it doesn't provide an alternative that uses minimal personal data, as required under the regulation. Meta tweaked its plan in November 2024 supposedly to reduce the amount of data used for targeted ads, but the Commission remains unconvinced that Meta is in compliance with the law.
For its part, Meta has accused the EU of 'moving the goalposts' during compliance discussions and of unfairly targeting its business model.
'The European Commission continues to discriminate against an American company's business model,' a Meta spokesperson told Reuters on Friday. 'A user choice between a subscription for a no-ads service or a free ad-supported service remains a legitimate business model for every company in Europe — except Meta.'
Meta and other U.S. tech companies have tried to frame the DMA and other international regulation as an attempt to unfairly punish them while supporting or subsidizing home-grown firms.
It's a narrative the Trump government has also adopted. Over the weekend, Canada dropped its digital services tax, a levy on the revenue large platforms earn from Canadian users, in a bid to restart trade negotiations with the US. Trump has pulled out of talks, citing the tax, which he called a 'blatant attack' on U.S. companies.
The DMA targets large online platforms, so-called gatekeepers, with restrictions designed to combat anti-competitive behavior. The legislation sanctions platforms that use their dominant market position to unfairly favor their own services or products, prevent developers from using third-party payment platforms, or track users for targeted advertising without consent.
The EU fined Apple €500 million ($570 million) for DMA violations in April. Last week, Apple made significant changes to its terms of service in the EU to comply with the DMA involving third-party apps, such as those from music streamer Spotify or Fortnite maker Epic Games on its App Store. Instead of taking its customary 30 percent commission for App Store sales of third-party apps, in the EU, Apple's commission will range from 2 percent to 13 percent, depending on the various choices made by third-party developers.
The European Commission was holding a meeting on Monday to poll users and developers like Sweden's Spotify about the changes and decide whether they are compliant with the DMA.
In a statement, Apple said it still disagreed with the European Commission regarding the DMA and mentioned its 'plan to appeal' the fine.
The Hollywood Reporter has reached out to the European Commission for comment.
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