How will the EU DMA “pay or consent” decision impact Meta’s business?
The European Commission published the text of its April Decision on Meta’s “pay or consent” scheme as implemented until November 2024. Since then, Meta has made significant changes to Facebook and Instagram in the EU, introducing a free "less-personalized ads" option. Yet the Commission maintains "that it is possible that Meta's non-compliance is ongoing."
I examine the Commission's reasoning for why Meta may still be non-compliant and explore potential solutions for Meta. I also analyze the Commission's striking approach: its stated willingness to ignore the economic pain DMA enforcement imposes on gatekeepers. This stance affects all gatekeepers, including Amazon, Apple, Google, and Microsoft. A separate piece will provide my legal analysis of the Decision's other aspects.
The headline from April focused on Meta's EUR 200M fine—far below the maximum EUR 15.2B (10% of global turnover). This relatively modest penalty seems designed to deflect attention from the Decision's prohibitionist and economically uninformed legal reasoning, perhaps hoping a lower sum will prevent the U.S. administration from viewing this as a tax or tariff.
Economic viability as the only limit on enforcement
Paragraph 154 reveals the Commission's approach to DMA enforcement:
“... the purpose of [the DMA] is to ensure, for all businesses, contestable and fair markets in the digital sector across the Union where gatekeepers are present, to the benefit of business users and end users. The achievement of those objectives through the implementation of specific obligations, including Article 5(2) of [the DMA], will inevitably impact the business models that gatekeepers choose for their designated CPSs. In that context, [the DMA] does not safeguard such business models from any constraint it mandates, nor is complying with that Regulation conditional upon preserving the profits gatekeepers generated prior to its adoption.”
The Commission believes Article 9(1) sets the only limit on how much the DMA may hurt gatekeepers. In case of exceptional circumstances beyond a gatekeeper's control that threaten its EU operations' economic viability, the Commission may suspend specific obligations. We can expect narrow interpretation here—perhaps pushing gatekeepers to accept minimal profits above a strictly defined cost base. In essence, gatekeepers become quasi-public utilities (despite the Commission's explicit denial in paragraph 245).
The Commission claims it need not consider DMA interpretations' effect on gatekeepers' profits until a gatekeeper applies under Article 9(1), arguing exceptional circumstances threaten its EU operations' viability.
From a European perspective, the Commission's biggest blind spot is its abandonment of serious third-party impact analysis. It ignores how withdrawing personalized advertising affects SME advertisers in the EU. It fails to recognize that platforms like Facebook and Instagram create massive market contestability where SMEs operate. Without these advertising channels, many EU SMEs will likely fail.
Why the EC found Meta's "pay or consent" non-compliant
The Commission ruled that Meta's pre-November 2024 "pay or consent" scheme didn't allow users to make a "specific choice for a less personalized but equivalent alternative" and to "validly consent" to personal data use.
Simply put: if Meta offers free services to anyone in the EU, it cannot charge for the option that doesn't combine data across services (the less personalized alternative).
The DMA permits "degradation of quality" as a "direct consequence" of not processing personal data or signing in users. However, the Commission views subscription fees as "conditions of access" that exceed DMA-allowed quality degradation.
The Commission treats this finding as independent of GDPR authorities' decisions. The EC interprets the DMA as separately requiring both "specific choice" (a DMA-only requirement) and GDPR "consent" for combining or cross-using personal data across services. The prohibition on charging for less personalized options (when a free option exists) stems from the "specific choice" requirement, not GDPR consent.
Will Meta's current model face non-compliance findings?
The Commission now reviews Meta's post-November 2024 scheme, including the free "less-personalized ads" option. Even if Meta successfully appeals, the Commission's decision on the new model will likely arrive sooner. What might it say?
The Commission appears to have left room to accept Meta's current model. The Decision emphasizes that subscription fees were "conditions of access," not just "degradation of quality." Perhaps the current model—even with non-skippable ads—would qualify as DMA-allowed "degradation of quality."
When preliminarily discussing Meta's current model, the Commission questioned only one aspect: the pre-selection of the free option with personalized ads. Meta could easily address this.
However, given the Commission's hostile tone and unwillingness to consider business reality, it may find "new" arguments against the post-November model.
For instance, perhaps the Commission might want to argue that data used for "less-personalized ads" falls under DMA cross-use/combination prohibitions. Meta’s “About less-personalized ads” lists:
How you engage with ads, such as clicking or liking them
Your age, the gender you provide and your location
Your device information, like the device or browser you’re using
Information about the content you’re viewing while you browse on our Products
I don't know whether Meta Ads processes this data separately or within Facebook. Meta should be able to achieve full separation if needed.
As a "nuclear" solution, Meta could separate "Facebook Ads" and "Instagram Ads" completely, eliminating cross-use of personal data between them and other Ads platforms. Each could then support its respective platform. This approach could benefit from Recital 36 DMA, which the EC acknowledged clarifies that cross-use/combination prohibitions don't apply between services "provided together with, or in support of" a core platform service.
This structure would arguably exempt the integrated ads backend and social media front-end from Article 5(2) DMA's cross-use prohibitions. Meta might even return to the "legitimate interest" GDPR basis[1] rather than consent. At minimum, it would deal with GDPR's consent requirement rather than the stricter, nebulous threshold the Commission conjures under the DMA.
Like restrictions on personalised advertising, this solution would have third-party consequences. The kind of effects for which the Commission has provided no evidence of consideration. Currently, SME advertisers benefit from a unified ad system that allows them to reach audiences across both platforms with a single campaign, shared budgets, and consolidated performance metrics. Meta’s decision to silo these services would mean advertisers would need to manage separate campaigns, split their already limited budgets, and lose the efficiency of cross-platform optimization.
[1] Often overlooked: the EU Court of Justice didn't require consent for Meta's use of first-party personal data for personalized advertising. The famous Meta judgment addressed third-party data. See my analysis The CJEU’s Decision in Meta’s Competition Case: Consequences for Personalized Advertising Under the GDPR (Part 1) and EDPB: Meta violates GDPR by personalised advertising. A "ban" or not a "ban"?.