Meta has decided to appeal a European Commission (EC) decision announced back on April 23 that saw the firm hit with a €200 million fine for violating the Digital Markets Act (DMA).
The decision from the Commission was about the binary choice the social media firm was offering to users in the bloc - that they either see personalized ads, or pay a subscription fee to go ad-free. The EC said it wanted Meta to offer an ad-supported version with less personalization. Now, Meta has hit back at the decision, calling it incorrect and unlawful.
Under the Digital Markets Act rules, big companies like Meta with significant platforms were labeled as Gatekeepers (large digital platforms with significant market power) and given specific rules to follow, including requiring GDPR consent in relation to DMA-specific personal data use for showing ads to users.
Meta believes that the Commission’s April decision against Meta ignored a Grand Chamber of the European Court of Justice (CJEU) ruling from July 2023, which, according to Meta, supports offering users the choice between a subscription or receiving a free service supported by personalized ads.
The social media giant believes that the EC’s decision flies in the face of the CJEU judgment and precedents and makes Meta the only company in Europe that is not allowed to use the business model in question. The company says that if it was forced to show ads with reduced personalization, then users, advertisers, and platforms would get “poorer outcomes” - it would also likely hurt Meta’s revenues.
While Meta may believe what it says, it’s not the only company operating as a Gatekeeper under the Digital Market Act, many other big tech firms are coming under increasing scrutiny as the EC tries to establish a more level playing field so that big firms don’t take advantage of smaller competitors.
Meta says that the mandated Less Personalized Ads service from the EC is unviable and ignores commercial realities. It said that the LPA uses around 90% less data than personalized ads resulting in less user engagements and less sales.
While users may say they do not want their data used for personalized ads, Meta believes that without personalization, user experience declines with an almost 800% rise in ads being marked as “irrelevant” or “repetitive”. It is important to note that Meta has not provided an actual number for the amount of complaints it receives.
Meta also said that the LPA also leads to worse outcomes for EU advertisers with small and medium-sized enterprises most impacted. It said:
“SME advertisers – the vast majority of our advertiser community – rely on direct response advertising which is no longer effective with LPA. Early feedback shows that LPA leads to fewer transactions – less personalized ads achieve 70% fewer onsite conversions and 61% fewer offsite conversions compared to our personalized ads. Despite numerous advertisers flagging these concerns to the Commission, they seem to have been ignored.”
Meta has called on the EC to “return to a better system of regulation” after expressing concern about a lack of consistent feedback and the shifting of “goalposts” by the Commission while Meta has tried to comply. It has called on the EC to stick to the text of the DMA and not make it about fines.