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Commission’s actions adopted recently are specifically focusing on the assessment of Meta’s practices under the EU consumer legislation. The action started in 2023, immediately after Meta requested consumers either to subscribe to use Facebook and Instagram against a fee or to consent to Meta’s use of their personal data to be shown personalized ads, allowing Meta to make revenue out of it (so-called “pay or consent”).
Background
National consumer authorities can order websites or social media accounts containing scams to be corrected, obscured or removed. They can also request information from domain registrars, internet service providers and banks to track financial flows and find out the identity of those behind bad practices. Often the traders responsible for such illegal practices are difficult to find, since they keep no permanent office or warehouse: i.e. their website may be relocated to different EU countries several times. By investigating their financial flow, this trader can be found faster; in the absence of cooperation from the trader, the authority can order the website or account (e.g. in a social media platform) to be closed. In such cases, consumers should also alert their credit card issuer to get their money back.
The EU-wide cooperation is applicable to consumer rules covering various areas such as unfair commercial practices, e-commerce, geo-blocking, package holidays, online selling, and passenger rights. However, there are some “subscription traps”: consumers are regularly offered trial periods (e.g. in a dating website), or they are proposed to win a new expensive phone. When consumers give their credit card details to access such offers, too often they later find out that a membership cost is debited every month without them having given an informed consent. Authorities get into contact with the traders, ask them to clarify the subscription conditions and withdrawal rights, and to stop the unwanted subscriptions.
Source: https://commission.europa.eu/live-work-travel-eu/consumer-rights-and-complaints/enforcement-consumer-protection/consumer-protection-cooperation-network_en#:~:text=In%20order%20to%20protect%20consumers,issues%20in%20a%20coordinated%20manner.
European Commission can alert national authorities and coordinate their action to tackle practices which harm a large majority of EU consumers. This is followed by negotiation with the businesses concerned, directly at EU level. With the entry into application of the Directive (EU) 2019/2161 on enforcement and modernisation of consumer law under the New Deal for Consumers the sanction could reach at least 4 percent of the turnover of the businesses in the states concerned.
See the directive on “new deal” (November 2019) in: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32019L2161&from=EN
Current national rules on penalties differ significantly across the Union. In particular, not all Member States ensure that effective, proportionate and dissuasive fines can be imposed on traders responsible for widespread infringements or widespread infringements with a Union dimension. Therefore, the existing rules on penalties of Directives 98/6/EC, 2005/29/EC and 2011/83/EU should be improved and, at the same time, new rules on penalties in Council Directive 93/13/EEC should be introduced.
European consumer’s protection
The EU legislation is aimed at better enforcement and modernisation of consumer protection in the member states. As soon as it cannot be sufficiently achieved by the states and by reason of the Union-wide character of the problem and be better achieved at Union level, the Union may adopt necessary regulatory measures.
Already the Directive 2005/29 adopted in May 2005 was dealing with the unfair business-to-consumer commercial practices in the EU-wide internal market.
More in: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32005L0029
National authorities in individual countries are responsible for the enforcement of EU consumer protection laws. In order to protect consumers when shopping across national borders, Consumer Protection Cooperation Regulation 2006/2004 established a network of competent public enforcers to tackle these issues in a coordinated manner. Updated EU-wide Consumer Protection Cooperation Regulation 2017/2394 provides the national authorities with stronger powers to detect irregularities and take speedy action against rogue traders: thus, if national consumer authorities work together at EU level, they can save taxpayers’ money.
Present coordinated action by the consumer protection cooperation network, CPC against Meta’s practices comes on top of other ongoing EU and national procedures related to the same model. Present Commission’s actions are focusing specifically on the assessment of Meta’s practices under EU consumer law and are distinct from the ongoing investigations against the company by the Commission on its ‘pay or consent’ model potentially breaching the Digital Markets Act, DMA as well as the Commission’s formal request for information under the Digital Services Act, DSA and the assessment by the Irish Data Protection Commission under the General Data Protection Regulation, GDPR.
National consumer protection authorities assessed several elements that could constitute misleading or aggressive practices, in particular whether Meta provided consumers upfront with true, clear and sufficient information. They analyzed whether this information allowed consumers to understand the implications of their decision to pay or to accept the processing of their personal data for commercial purposes on their rights as consumers.
In addition, the CPC authorities are concerned that many consumers might have been exposed to undue pressure to choose rapidly between the two models, fearing that they would instantly lose access to their accounts and their network of contacts.
The CPC Network is a network of authorities responsible for the enforcement of EU consumer protection laws. Under the Consumer Protection Cooperation Regulation, and with the coordination of the European Commission, it can take action to address cross-border issues at EU level. Moreover, within the same framework, consumer associations, such as the European Consumer Organisation, BEUC can post alerts about emerging market threats and their information is then directly accessible by enforcement authorities.
On 30 November 2023, BEUC alerted the CPC network about potentially misleading and aggressive practices in Meta’s new subscription model. In addition, CPC authorities from different member states received several complaints from national organisations in this regard.
“Pay or consent” model
Consumer protection authorities assessed several elements that could constitute misleading or aggressive practices, in particular whether Meta provided consumers upfront with true, clear and sufficient information. They analyzed whether this information allowed consumers to understand the implications of their decision to pay or to accept the processing of their personal data for commercial purposes on their rights as consumers.
In addition, CPC authorities are concerned that many consumers might have been exposed to undue pressure to choose rapidly between the two models, fearing that they would instantly lose access to their accounts and their network of contacts.
Meta’s ‘pay or consent’ model might breach EU consumer law; hence, the Commission coordinated this action which is led by the French Directorate General for Competition, Consumer Affairs and Fraud Prevention. The action started in 2023, after Meta’s request for consumers overnight to either subscribe to use Facebook and Instagram against a fee or to consent to Meta’s use of their personal data to be shown personalized ads, allowing Meta to make revenue out of it (‘pay or consent’ model).
Reference to: https://ec.europa.eu/commission/presscorner/detail/en/ip_24_3862
Key elements of the action against Meta
CPC authorities identified several practices in the context of Meta’s roll-out of its new business model that raise concern and could potentially be considered unfair and contrary to the Unfair Commercial Practices Directive, UCPD (concerning business-to-consumers commercial practice) and the Unfair Contract Terms Directive, UCTD (on unfair terms in consumer contracts):
= Misleading consumers by using the word ‘free’ while, for users who do not want to subscribe against a fee, Meta requires them to accept that Meta can make revenue from using their personal data to show them personalized ads;
= Confusing users by requiring them to navigate through different screens in the Facebook/Instagram app or web-version and to click on hyperlinks directing them to different parts of the Terms of Service or Privacy Policy to find out how their preferences, personal data, and user-generated data will be used by Meta to show them personalized ads;
= Using imprecise terms and language, such as ‘your info’ to refer to consumers’ ‘personal data’ or suggesting that consumers who decide to pay will not see ads at all, while they might still see ads when engaging with content shared via Facebook or Instagram by other members of the platform;
= Pressurizing consumers who have always used Facebook/Instagram free of charge until the new business model was introduced, and for whom Facebook/Instagram often constitute a significant part of their social lives and interactions to make an immediate choice, without giving them a pre-warning, sufficient time, and a real opportunity to assess how that choice might affect their contractual relationship with Meta, by not letting them access their accounts before making their choice.
More on UCPD (2005) in: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:32005L0029
More on UCTD (1993) in: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:01993L0013-20220528
Commission’s opinion: quotations
= “We will not stand by and watch some sneaky practices that mislead consumers. We are proud of our strong consumer protection laws which empower Europeans to have the right to be accurately informed about changes such as the one proposed by Meta. In the EU, consumers are able to make truly informed choices and we now take action to safeguard this right”.
Věra Jourová, Vice-President for European Values and Transparency
= “Consumers must not be lured into believing that they would either pay and not be shown any ads anymore, or receive a service for free, when, instead, they would agree that the company used their personal data to make revenue with ads. EU consumer protection law is clear in this respect. Traders must inform consumers upfront and in a fully transparent manner on how they use their personal data. This is a fundamental right that we will protect”.
Didier Reynders, Commissioner for Justice
Source: https://ec.europa.eu/commission/presscorner/detail/en/ip_24_3862
Conclusion
On 1 March 2024, the Commission formally sent Meta a request for information under the DSA to provide more information related to the Subscription for no Ads options for Facebook and Instagram that Meta introduced for users in the EU in November 2023.
On 25 March 2024, the Commission opened proceedings against Meta to investigate whether the ‘pay or consent’ model, introduced for users in the EU in November 2023, complies with DMA (art. 5,2) which requires gatekeepers, such as Meta, to obtain consent from users when they intend to combine users’ personal data between designated core platform services and other services. On 1 July 2024, the Commission sent its preliminary findings to Meta, informing them that their ‘pay or consent’ advertising model fails to comply with DMA.
Until 1 September 2024, META is to reply to the letter of the CPC network and the Commission and to propose “working solutions”. If Meta does not take the necessary steps to solve the concerns raised, CPC authorities can decide to take enforcement measures, including sanctions.