Report from Wall Street Journal
In Brief – The European Commission has announced a tentative agreement with Meta to resolve the Digital Markets Act (DMA) investigation of Meta’s offer to provide ad-free subscription plans for Facebook and Instagram, which critics dubbed “Pay or Consent”. The commission argued that Meta’s initial binary option of a free version with personalized ads or a paid, ad-free subscription, did not offer users adequate choice. The regulator demanded that users be given a third option, which was also free and included ads that were less targeted. In April, the regulator rejected Meta’s plan for an option with less-personalized ads and fined the company $200 million. While Meta continues to argue that “personalized ads are vital for Europe’s economy,” in November it modified the proposal for an option with ads that were less-personalize that focused on design, wording, and transparency to give users greater clarity about the choices. The Commission accepted the November proposal largely as presented, will monitor the new ad model and seek feedback, and will not pursue additional fines at this time.
Context – Apple, Google, and Meta were the first “gatekeepers” facing DMA investigations. The Commission has objected to core aspects of Apple’s business, including App Store rules and fees, leading to a 500 million euro fine and an ongoing legal battle. Google continues to try to resolve concerns over how its general search service treats “vertical search” to the satisfaction of the Commission, vertical search competitors, and large online advertisers like airlines and hotel chains, and the regulator has since opened a new DMA investigation of Google search rankings as well an antitrust investigation of Google’s AI practices. Offering users the choice of online ads or a paid subscription predated the DMA and seemed to have the backing of the European Court of Justice in the GDPR context, leading Meta to argue that they were being unfairly singled out. However, an Austrian court recently ruled that Der Spiegel violated the GDPR with their binary offer of a free service with targeted ads or an ad-free paid subscription, potentially raising issues for many web services with ad-based revenue models.