Meta Faces Daily Fines Over Proposed Changes to Pay-Or-Consent Model

Meta's proposed changes to its pay-or-consent model for using data in the EU may not comply with an antitrust order issued in April. The European Commission has threatened daily fines if the changes do not meet requirements. The regulator has been at odds with Meta over the model, which requires users to pay or consent to data collection.

The European Commission's €200 million fine against Meta Platforms (META) in April 2025 for violating the Digital Markets Act (DMA) marks a critical inflection point for the company's regulatory trajectory [1]. This decision, the first enforcement action under the DMA's Article 5(2), signals escalating scrutiny over Big Tech's data practices and could reshape Meta's business model, stock valuation, and operational strategy.

The EU's ruling focused on Meta's “pay or consent” model, which required users in the EU, EEA, and Switzerland to either accept personalized ads (via GDPR consent) or pay €9.99/month for an ad-free version. The Commission deemed this non-compliant because the paid option was not an “equivalent alternative service” under Article 5(2). Specifically, the EC argued that the subscription model created a monetary barrier, violating the requirement for equivalence in access conditions, and consent was not freely given due to Meta's dominance and network effects [1].

Meta revised its model in November 2024 by introducing an “Additional Ads” option—free but with less personalized ads and mandatory ad breaks. However, the EC identified flaws: pre-checked consent boxes, degraded user experience via ad breaks, and unresolved issues around data processing. As of June 2025, the EC is still evaluating compliance, with potential daily fines starting July 27 if unresolved [1].

The immediate €200 million fine pales compared to the revenue Meta derived from behavioral ads during the non-compliance period. The bigger threat is daily penalties, which could amount to hundreds of millions if the EC deems Meta still non-compliant post-July 27. Analysts estimate Meta's global daily turnover is ~$100 million, meaning penalties could hit up to $5 million/day if the maximum 5% rate applies [1].

Beyond fines, the EC's demands could force Meta to abandon monetized alternatives entirely. For instance, shifting to non-personalized ads (e.g., contextual ads) would slash revenue, as 97.5% of Meta's European income comes from behavioral ads. Even a 10% revenue hit would reduce 2025 EBITDA by ~$1.5 billion—a significant drag on valuation [1].

Meta has hinted at strategic pivots, such as expanding ads on WhatsApp, which is less regulated in the EU, or shifting to contextual ads. However, these moves risk alienating users or reducing profitability [1].

Investment Implications: Proceed with Caution

Meta's stock has already factored in some regulatory risk, but the path forward remains fraught. Near-term risks include daily fines and potential revenue declines, which could pressure shares. Investors should monitor compliance updates and EC communications closely. Long-term opportunities may arise if Meta successfully pivots to compliant models, but execution risks are high [1].

Until clarity emerges, Meta's stock is a high-risk bet. Short-term traders might consider hedging via puts or inverse ETFs, while long-term investors should wait for a resolution before adding exposure. For now, the EU's regulatory hammer remains a Sword of Damocles over Meta's valuation [1].

References:
[1] https://www.ainvest.com/news/meta-eu-dma-compliance-risks-threat-valuation-strategic-flexibility-2506/