The European Commission has issued a stern warning to Meta, the parent company of Facebook and Instagram, over its controversial "pay-or-consent" model for ad tracking. The EU’s top tech regulator stated that the model, which forces users to either pay for ad-free access or consent to being tracked for personalized ads, may violate the Digital Markets Act (DMA). The Commission argues that Meta’s system does not provide users with a genuinely free and fair choice.

Digital Markets Act in Action

This move marks one of the EU’s first major enforcement actions under the DMA, which came into effect in March 2024. Designed to curtail the dominance of tech giants labeled as “gatekeepers,” the DMA mandates that users must have a clear option to use core platform services without being forced into targeted advertising. The European Commission says Meta's approach may coerce users into accepting tracking under the guise of “consent.”

Potential for Daily Penalties

If Meta is found to be in breach, the company could face daily fines of up to 5% of its average daily worldwide turnover. This could amount to millions in penalties, with enforcement possible within months if the investigation confirms non-compliance. The EU's antitrust chief Margrethe Vestager emphasized that platforms should not exploit their dominant market position to impose unfair terms on users.

Meta Defends Its Practices

Meta has responded by defending its model, arguing that it complies with the GDPR and the DMA, and offers users an alternative to ad-supported services. “We believe our subscription model aligns with regulatory requirements and gives users a meaningful choice,” said a Meta spokesperson. However, regulators remain unconvinced, especially over the high subscription fees which could be seen as disincentivizing privacy-conscious users.

Wider Implications for Big Tech

This case could set a powerful precedent for other tech firms operating in the EU, such as Google and TikTok, which have also explored or implemented similar consent models. Regulators are expected to scrutinize these practices closely in the coming months. Consumer advocacy groups have long criticized these models as manipulative, claiming they undermine digital rights.