Meta’s new approach to handling advertiser data has been approved by the U.K. Competition and Markets Authority. This comes ahead of the rollout of a new digital markets competition regime, which will grant it more power to quash the monopolistic behaviours of big tech companies.
As well as approving Meta’s commitments, the CMA has also closed its existing Competition Act cases into Google’s Play Store and Apple’s App Store, initiated in 2022 and 2021 respectively. The authority was concerned that requiring apps on these platforms to use Google and Apple’s respective billing systems for in-app purchases would harm competition.
Google did propose alternate payment options in response, but the CMA has rejected them as they would still result in developers paying a high commission and could be off-putting for users due to the use of a pop-up screen.
The CMA stated in a press release that its new regime, the Digital Markets, Competition and Consumers Act, will enable it to investigate Google, Apple, and other tech companies’ potentially anticompetitive practices “more holistically.”
The rules “will build on and leverage its experience in areas it has already studied, such as mobile ecosystems, which includes app stores.”
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How Meta’s new advertising data commitments came about
The investigation into Meta was launched in June 2021, as the CMA raised concerns over how the company’s data practices might be giving the platform an undue competitive advantage.
Originally, Mark Zuckerberg’s company allowed advertisers to opt out from having their data used to enhance Marketplace’s algorithms. However, the updated rules remove the need for this opt-in or opt-out process, ensuring a fairer playing field for advertisers using Facebook Marketplace.
As of 2022, Meta had more than 10 million active advertisers across its services. It earned between £4 and £5 billion from digital advertising in the U.K. in 2021, the company told the CMA, making it the largest supplier of digital display ads in the country. As such, it has a dominant position that it cannot abuse, as per the Chapter II prohibition of the Competition Act 1998.
Meta collects data from its digital advertising services and its single sign-in API for third-party websites, Facebook Login. The 2021 investigation was opened to see whether Meta was using this data to give its own services, including Facebook Marketplace, an unfair advantage and breaching the Competition Act.
“For example, data derived from users’ engagement with ads on Facebook could provide Meta with knowledge as to whether a user is interested in a particular product such as trainers, which could then in turn feed into a decision to show listings for shoes to that same user when it opens the Facebook Marketplace tab,” the CMA said in a press release.
In response to the CMA’s concerns, Meta submitted a series of commitments that would prevent it from “exploiting” its advertising customers’ data in May 2023. These included:
- Offering advertisers the ability to opt out of their advertising data being used in the development or operation of Facebook Marketplace. This includes data that illustrates how users engage with their ads and can indicate to Meta which products or services a user is interested in.
- Limiting the use of advertising data that identifies advertisers to develop Meta products and confirming this commitment to advertisers via an official statement in its Code of Conduct.
In November 2023, the CMA accepted those commitments, but Meta voluntarily submitted a variation in April 2024. The proposed variation would allow Meta to limit the use of certain data from all advertisers being used in the development or operation of Marketplace.
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This would give the company an additional way of implementing the data controls outlined in the original commitments, and all Marketplace advertisers can be certain their data is not being used to benefit the platform without having to opt in or out.
The CMA consulted over the varied commitments in May and June this year, and announced their acceptance on Aug. 20.
Similarly, Amazon made a number of commitments to the CMA in 2023 after an investigation into whether it was abusing its power as the U.K.’s leading online marketplace ended. These included not to use third-party sellers’ data to gain an unfair advantage.
While the conflict between Meta and the U.K. authority ended amicably, the same cannot be said with the E.U. and its investigation into Meta’s potentially anticompetitive practices. In July, the European Commission ruled that Meta’s ad-free subscription tiers created a “pay or consent” advertising model that violates the Digital Markets Act.
The “pay or consent” model “forces users to consent to the combination of their personal data and fails to provide them a less personalised but equivalent version of Meta’s social networks,” the Commission stated.
The approach is also anticompetitive as it leveraged Meta’s dominance to limit consumer choice, making it harder for competitors without vast data pools to compete in offering targeted advertising services.
The DMA, established in 2022, is an E.U. regulation that intends to promote fairness and competition among digital products and services.
What is the Digital Markets, Competition and Consumers Act?
The DMCCA is a law designed to regulate the behaviour of major digital firms with significant market power. It was greenlit back in 2020, but due to various delays, it wasn’t passed by Parliament until April 2023.
It grants the CMA new powers to impose requirements on tech companies with “strategic market status,” which are reminiscent of the “gatekeeper” organizations that must abide by the E.U.’s DMA.
The fact that the CMA did not accept Google’s commitments regarding the Play Store suggests that it will be one of the first to achieve such status. If they had been accepted, this would limit what actions the CMA could take against Google under the DMCCA.
While there are similarities, the new legislation is less one-size-fits-all than the DMA. Under the DMCCA, the CMA can apply bespoke regulations, so-called ‘Conduct Requirements’, to companies with strategic market status to address their specific problems.
It is expected to come into force “later this year,” according to the CMA.
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