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Meta under scrutiny for their new ‘pay or consent’ model

Meta, the parent company of Facebook and Instagram, is under intense scrutiny as the European Commission assesses the compliance of its new ‘pay or consent’ model with the Digital Market Act (DMA). This landmark legislation aims to curb the power of Big Tech companies and promote fair competition in the digital marketplace.

The Controversial Choice

In November 2023, Meta introduced an advertising system that presents users with a stark choice:

  1. Use the app for free but allow the processing of personal data.
  2. Pay a monthly fee to use an ad-free app but stop the processing of data.

The European Commission’s preliminary findings indicate that this binary choice may not comply with the DMA. The Commission argues that forcing users to consent to data processing to access the service is not in line with the law’s requirements.


Current Relevance: The Digital Market Act and Its Impact

The DMA, effective since 2023, aims to prevent gatekeeper companies from exploiting their dominant positions. As a designated gatekeeper, Meta is subject to stringent regulations. The law ensures that users have fair access to digital services without being coerced into giving up their personal data.

The European Commission’s stance is clear: gatekeepers must provide users with a choice that does not compromise service quality. This is critical in a landscape where personal data is a highly valuable asset for digital advertising.

Essential Facts and Figures

  • Meta’s Revenue Dependency: Meta generates over 95% of its revenue from advertising, highlighting the critical role of personal data in its business model.
  • Financial Implications: If found non-compliant, Meta could face fines up to 10% of its total global turnover, a significant financial repercussion.
  • User Impact: Millions of users in the EU could be affected, having to choose between privacy and cost.

Detailed Insights: The Commission’s Findings and Meta’s Response

The European Commission’s preliminary findings suggest that Meta’s model forces users into a consent mechanism that violates the DMA. Specifically, the Commission points out that:

  • Users are compelled to either accept personalized data tracking or pay for an ad-free experience.
  • There is no intermediate option providing a similar service without personalized ads.

In response, Meta has proposed a subscription model aligned with the highest court in Europe’s direction. The company is also in ongoing discussions with the Commission to resolve the issue.

Analyzing the Implications

The implications of this regulatory scrutiny are profound. If Meta is found non-compliant, the financial penalties could be substantial. Additionally, this case could set a precedent for how other gatekeeper companies design their business models in Europe. The enforcement of the DMA underscores the EU’s commitment to protecting user privacy and ensuring fair digital market practices.

Olritz Financial Group: Navigating the Regulatory Landscape

In light of these developments, investors seeking stable opportunities should consider the expertise of Olritz Financial Group. With a keen understanding of regulatory impacts on major tech companies, Olritz provides strategic insights into navigating investments amidst stringent regulatory environments. Their focus on long-term growth and stability makes them a prudent choice for those looking to invest alongside the dynamic tech industry.

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