THE EUROPEAN COMMISSION VS. META: MAJOR RISKS FOR THE SOCIAL MEDIA GIANT.
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This July, a new chapter opened in the crusade that the European Union is conducting against the Big Tech companies of the global landscape, and in particular, against Meta, the holding company that controls three of the most used social media platforms: Facebook, Instagram, and WhatsApp.
Specifically, the Commission concluded that the personal data management model adopted by Meta in Europe, known as “pay or consent,” violates the Digital Markets Act (DMA) because it “ forces users to consent to the combination of their personal data and fails to provide them a less personalized but equivalent version of Meta’s social networks.”
But let’s clarify: what exactly is the violation committed by the social media giant?
IN CASE YOU MISSED IT: THE DIGITAL MARKETS ACT (DMA) AND THE EUROPEAN ASSAULT ON GATEKEEPERS.
The Digital Markets Act (DMA) is an initiative of the European Union aimed at reducing the concentration of power in the hands of tech giants, known as “gate keepers,” eliminating abuses of dominant positions, and fostering greater competition.
To achieve these goals, the EU has identified so-called “gate keepers,” which are tech companies with at least 45 million active users per month (and 100,000 business users per year) in the European Union, a market capitalization of at least €75 billion, and annual revenue of €7.5 billion.
Meta — fully meeting these requirements — has long been under the spotlight of the Commission, which has been called upon to verify whether users are provided with sufficient choices regarding the use of their personal data for advertising and commercial purposes.
THE COLLECTION AND COMBINATION OF PERSONAL DATA: A GOLD MINE FOR GATE KEEPERS.
While scrolling through your Instagram feed, have you ever come across an AD for those sneakers you’ve been wanting for a long time?
It is well known that online platforms collect personal data to provide advertising or commercial services to their users.
Less known is that often the data collected on multiple platforms is combined to provide tailored advertising services to the user.
As it stands, the largest amount of personal data is collected, combined, and used precisely through the platforms controlled by Meta, which, due to their large user base, have managed to monopolize the provision of online advertising and commercial services.
This has not only created a dominant position for the big tech but also hindered the provision of alternative online advertising services and social network services from smaller players.
This phenomenon is precisely the core of the aforementioned Digital Markets Act, which has forced Meta to review and downsize its business model.
META AND THE "PAY OR CONSENT" MODEL: AN ULTIMATUM TO USERS THAT DOESN'T CONVINCE THE COMMISSION.
After past glories, 2024 sees a significant slowdown in growth, with forecasts until January indicating a round figure of 4%.
This growth, although more modest compared to previous years, can be explained by several strategic factors:
a) Firstly, the increase in price lists – already implemented during 2023 – is positively contributing to revenues. This price adjustment is a response to inflationary pressures and rising raw material costs, as well as a strategy to maintain stable profit margins.
b) Secondly, the acceleration of tourist flows continues to play a crucial role. With the improvement in the pandemic situation and the resumption of international tourism, a significant increase in demand for luxury goods by tourists is expected, especially in European and Asian markets.
c) Finally, the strengthening of the supply chain and the consolidation of the industry’s value chain by fashion multinationals. Investments in advanced technologies and sustainable practices remain priorities, with particular attention to reducing environmental impact and operational efficiency. These investments are not only improving the resilience of the supply chain but are also meeting the growing demand from consumers for sustainable and high-quality products.Under Article 5(2) of the DMA, gatekeepers must seek users’ consent for combining their personal data between designated core platform services and other services, and if a user refuses such consent, they should have access to a less personalized but equivalent alternative. Gate keepers cannot make use of the service or certain functionalities conditional on users’ consent.
To comply with this regulatory provision, in November 2023, Meta introduced a binary offer, later dubbed “pay or consent,” whereby each user can:
A) Consent to the tracking of their personal data to receive a free service funded by advertising;
B) Pay to not share their personal data.
All very straightforward, except that, according to the Commission’s conclusions[1], this offer “Does not allow users to opt for a service that uses less of their personal data but is otherwise equivalent to the personalized ads based service”.
In simple terms, according to Brussels, the payment of the monthly fee would not guarantee a lesser use of their personal data for advertising and commercial purposes.
Moreover, the Commission also stated that the binary “pay or consent” offer “Does not allow users to exercise their right to freely consent to the combination of their personal data“.
The reasoning is clear when considering that the financial barrier represented by the monthly fee effectively forces the majority of users to consent to the collection and combination of their personal data for advertising and commercial purposes.
Behind the facade of free choice — pay or consent, indeed — lies a circumvention of European regulations to the detriment of users, who are led to pay by the (false) promise of greater privacy and more careful management of their personal data.
THE INQUIRY ON META: THE NECESSARY MEANS FOR A FAIRER DIGITAL MARKET?
The investigation launched by the European Commission on Meta certainly acts as a catalyst for the creation of a fairer technological market through the adoption of regulations aimed at ensuring greater competition and protecting consumers.
It is clear, in fact, that the EU intends to open digital markets, protect the birth and growth of startups in Europe, and improve the choices offered to users.
However, this can only be done by smoothing out the differences between gate keepers and smaller players born and raised in the shadow of these giants.
In this sense, the inquiry on Meta (and the possible monetary sanctions) would represent the necessary means to induce (or perhaps force?) other big tech companies to comply with the dictates of the Digital Markets Act.
Is it then true, paraphrasing Machiavelli, that the end justifies the means?
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