Meta’s Ad-Free Subscription Violates Competition Law, E.U. Says

When Meta introduced a subscription option last year that would allow users in the European Union to pay for an advertising-free experience of Instagram and Facebook, it was meant to fix regulatory problems the company faced in the region.

The plan created new legal headaches instead.

On Monday, European Union regulators said Meta’s subscription, which costs up to 12.99 euros a month, amounted to a “pay or consent” scheme that required users to choose between paying a fee or handing over more personal data to Meta to use for targeted advertising.

Meta introduced the subscription last year as a way to address regulatory and legal scrutiny of its advertising-based business model. Of most concern was the company’s combination of data collected about users across its different platforms — including Facebook, Instagram and WhatsApp — along with information pulled from other websites and apps.

Meta argued that by offering a subscription, users had a fair alternative.

But regulators on Monday said the system was no choice at all, forcing users to pay for privacy. The authorities said Meta’s policy violated the Digital Markets Act, a new law aimed at reigning in the power of the biggest tech companies.

The law, known as the D.M.A., is intended to prevent large tech companies from using their size to coerce users into accepting terms of service they would otherwise reject, including the collection of personal data. The concern was platforms like Instagram and Facebook are so widely used that people have to choose to either hand over their data or not join at all.

Regulators said the law required companies to allow users to opt out of having their personal data collected while still getting a “less personalized but equivalent alternative” of the service.

“Meta’s ‘pay or consent’ business model is in breach of the D.M.A.,” said Thierry Breton, the European commissioner who helped draft the law. “The D.M.A. is there to give back to the users the power to decide how their data is used and ensure innovative companies can compete on equal footing with tech giants on data access.”

In a statement, Meta said that the subscription service complied with the Digital Markets Act and that it would work with European regulators to resolve the investigation.

Last week, Nick Clegg, Meta’s president, said that Europe was falling behind economically because of overregulation. “Europe’s regulatory complexity and the patchwork of laws across different member states often makes companies hesitant to roll out new products here,” he said.

The announcement on Monday is one step in a longer process. The European Commission, the executive branch of the 27-nation bloc, has until March to complete its investigation. If found guilty, Meta could face fines of up to 10 percent of its global revenue and up to 20 percent for repeat offenses.

Meta is the second company to face charges under the Digital Markets Act. Last week, the commission brought charges against Apple for unfair business practices related to the App Store.