Meta’s new approach to handling advertiser data has been approved by the UK Competition and Markets Authority, ahead of the introduction of a new digital competition regime that will give it greater power to crack down on monopolistic behaviour by big tech companies.
In addition to approving Meta’s commitments, the CMA also closed its existing Competition Law cases on the Google Play Store and Apple App Store, initiated in 2022 and 2021 respectively. The body was concerned that requiring apps on those platforms to use Google’s and Apple’s respective billing systems for in-app purchases would harm competition.
Google responded by proposing alternative payment methods, but the CMA rejected them because they would require developers to pay a high commission and could discourage users by requiring a pop-up screen.
The CMA said in a press release that the new rules, known as the Digital Markets, Competition and Consumer Act, will enable it to conduct a “more holistic” investigation into potentially anti-competitive practices by Google, Apple and other technology companies.
The rules “will build on and leverage the company’s experience in areas it has already explored, such as mobile ecosystems, including app stores.”
SEE: UK government investigates Amazon-Anthropic merger over competition concerns
How Meta’s New Advertising Data Obligations Came About
The investigation into Meta began in June 2021 when the CMA raised concerns that the company’s data practices could give the platform an unfair competitive advantage.
Initially, Mark Zuckerberg’s company allowed advertisers to opt out of having their data used to improve Marketplace algorithms. However, the updated policy eliminates the need for this opt-in or opt-out process, providing a fairer environment for advertisers using Facebook Marketplace.
In 2022, Meta had more than 10 million active advertisers on its services. The company made between £4 billion and £5 billion from digital advertising in the UK in 2021, the CMA said, making it the largest provider of digital display advertising in the country. As such, it has a dominant position that it cannot abuse, under the ban under Chapter II of the Competition Act 1998.
Meta collects data from its digital advertising services and its single sign-on API for third-party websites, Facebook Login. The 2021 investigation was launched to investigate whether Meta uses this data to give its own services, including Facebook Marketplace, an unfair advantage and violate the Competition Act.
“For example, data from user interactions with Facebook ads could tell Meta whether a user is interested in a particular product, such as sports shoes, which could then inform Meta’s decision to display shoe offers to the same user when they open a Facebook Marketplace tab,” the CMA said in a press release.
In response to the CMA’s concerns, Meta made a series of commitments that would prevent it from “exploiting” advertising customer data in May 2023. These included:
- Offer advertisers the ability to opt out of having their advertising data used in the development or operation of Facebook Marketplace. This includes data that illustrates how users interact with their ads and may 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 through an official statement in the Code of Conduct.
In November 2023, the CMA accepted these commitments, but Meta voluntarily submitted a change in April 2024. The proposed change would allow Meta to restrict the use of certain data from all advertisers used in the development or operation of the Marketplace.
SEE: UK regulator investigates Microsoft and Inflection AI employment over ‘merger situation’
This would give the company additional leverage to implement the data controls outlined in the original commitments, and all Marketplace advertisers would be able to be confident that their data is not being used to benefit the platform without having to consent or object.
The CMA consulted on the various commitments in May and June this year and announced their adoption on 20 August.
Similarly, Amazon made a series of commitments to the CMA in 2023 following an investigation into its abuse of power in relation to the winding down of the UK’s leading online marketplace. These included not using third-party seller data to gain an unfair advantage.
While the conflict between Meta and the UK regulator ended amicably, the same cannot be said for the EU and its investigation into Meta’s potentially anti-competitive practices. In July, the European Commission ruled that Meta’s ad-free subscription tiers created a “pay or accept” advertising model that violated the Digital Markets Act.
The “pay or consent” model “forces users to consent to the combination of their personal data and does not provide them with a less personalised but equivalent version of Meta’s social networks,” the Commission said.
This approach is also anti-competitive because it exploits Meta’s dominant position to limit consumer choice, making it difficult for competitors without large data assets to offer targeted advertising services.
The DMA, passed in 2022, is an EU regulation that aims to promote fairness and competition in the market for digital products and services.
What is the Digital Market, Competition and Consumers Act?
The DMCCA is a law aimed at regulating the behavior of large digital companies with significant market power. It was approved in 2020 but, due to various delays, was not passed by parliament until April 2023.
It gives the CMA new powers to impose requirements on technology companies with a “strategic market status”, which are akin to “gatekeeper” organisations that must comply EU DMA.
The fact that the CMA has not accepted Google’s Play Store commitments suggests that it will be one of the first companies to achieve such status. If accepted, it would limit the actions the CMA could take against Google under the DMCCA.
While there are similarities, the new rules are not as universal as the DMA. Under the DMCCA, the CMA can apply special rules, known as “Conduct Requirements,” to companies with strategic market status to address their specific concerns.
It is expected to come into force “later this year”, according to the CMA.
