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Investors are remaining on the sidelines amid a broad sell-off in tech stocks this year. Shares of Facebook parent Meta Inc. have fallen more than 30% this year due to a volatile macro environment and weaker-than-expected earnings.
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Facebook’s parent company Meta The company was criticised by EU regulators on Monday for violating the bloc’s landmark antitrust law over its recently launched ad-supported social networking service.
The European Commission termed the ad-supported subscription option a “pay or consent” model, meaning users must either pay to use Meta’s platform without ads or consent to their data being processed for personalized ads. The service was introduced for Facebook and Instagram in Europe last year.
“In the Commission’s preliminary view, this alternative would force users to consent to the integration of their personal data without offering them a less personalized but equivalent version of the Meta social network,” the regulator said in a statement on Monday.
In a statement to CNBC, a Meta spokesperson said the company’s ad-supported subscription model “follows the instructions of the European Supreme Court and complies with the DMA.”
“We look forward to further constructive dialogue with the European Commission to conclude this investigation,” the spokesman added.
Meta introduced the new model after the European Court of Justice, the EU’s highest court, ruled last year that companies could offer “alternative” versions of their services that didn’t rely on collecting data for advertising.
Meta had previously pointed to this ruling as a reason to introduce subscription offers.
In a statement on Monday, the European Commission said Meta’s ad-supported services are not DMA-compliant for two main reasons: First, users cannot opt into services that use less personal data but are equivalent to “personalized advertising”-based services.
The regulator said users should still have the right to “access comparable services that use less personal data, in this case for advertising personalization.”
Another reason the EU cites is that Meta’s ad-supported service does not allow users to exercise their right to “freely consent” to their personal data being used to target them with online ads.
Potential for huge fines
The EU’s Digital Markets Act (DMA) officially came into force in March this year and aims to crack down on anti-competitive behaviour by large digital companies and force them to open up some of their services to rivals.
Under the DMA, companies could face huge fines and end up paying as much as 10% of their annual global revenues, a figure that could rise to 20% in cases of repeated violations.
In Meta’s case, if the Commission’s final investigation determines that it violated the DMA, it could face fines of up to $13.4 billion, based on the company’s 2023 annual revenue.
After receiving the EU’s preliminary findings, Meta had the opportunity to defend itself in writing.
The European Commission’s investigation, launched in March alongside two other investigations into tech giants Apple and Alphabet, is expected to be concluded within 12 months of initiating the proceedings.