Cookies – Consent or Pay?

March 2024

UK and EU data protection regulators are grappling with the compliance of the so-called ‘consent or pay’ model, also known as ‘pay or okay’. Put simply, this model means accessing online content or services is dependent on users either consenting to being tracked for advertising purposes (using cookies or similar technologies), or paying for access without tracking and ads.

This model – and the varying approaches to it – raises questions about whether this can be fair, and whether consent can be ‘freely given’. But it also touches on far more than data protection. It speaks to acceptable business practices, competition models, consumer protection laws, accessible credible journalism and more.

Ad-funded online content and services

‘Consent or pay’ is one of a number of solutions intended to address issues surrounding online advertising and its use of cookies. None of them, it has to be said, are perfect.

This is all coming to a head as data protection regulators in Europe and the UK push for compliance with cookie laws (e.g. PECR in the UK). For example, the UK’s ICO says for the necessary consent to be valid website operators must make sure it’s as easy for people to ‘Reject all’ advertising cookies as it is to ‘Accept all’. More UK companies to be targeted for non-compliant cookies

This causes a problem. As increasing numbers click ‘Reject all’, advertising revenues will take a significant hit. And advertising matters. When a US Senator asked Mark Zuckerberg how Facebook remained free, he famously and simply answered; “We run ads”.

It’s a point that can be made more broadly – we’ve all enjoyed a vast amount of free online content and services because of personalised advertising. Lots of the content and services we routinely access online are ad-funded and rely on a large percentage of users accepting cookies to target these ads. It’s why we can waste time (or relax) playing online games for free.

Online content and service providers have to pay people to create content, run websites, create apps and so on. Commercial businesses also want to turn a profit. The balance lies between the quality, value and integrity of the content they offer, and the advertising revenues which can be gained by personalised advertising.

We’ve all been tracked and served adverts as we browse the internet. Personalised ads mean we have a better chance of being shown ads for products and services which match our interests and needs. Yes, some of this activity is annoying, trades on our habits and may sometimes even be downright harmful. That isn’t to say all of it is problematic; again, this is a question of balance. Regulators have to tread a delicate line between protecting end-users without hampering business from offering us fair products, content and services.

We may not want to be tracked, but online publishers and service providers can’t be expected to provide something for nothing. Businesses aren’t under any obligation to provide us with stuff completely for free.

Which brings us back to the concept of ‘consent or pay’. This concept hit the headlines last year when Meta introduced a payment option to users of Facebook and Instagram in the EU (not in the UK), offering an ad-free experience for a fee. This is currently the subject of complaints by consumer rights groups in Europe. Meanwhile the ‘consent or pay’ approach has been adopted by some of Germany’s major newspapers, and others.

Just pay

Another option is for all content to be put behind a pay wall. For example, in the UK you have to subscribe and pay to read online articles published by the Telegraph, The Times and the Spectator magazine. Often a limited number of free articles are provided before you have to pay.

Cookie free solutions

Other cookie-less ad solutions are being rapidly developed, such as contextual advertising. You can read more about the options here: Life after cookies

But with solutions which don’t use third-party tracking cookies still in their infancy, and concerns they won’t be able to produce the same return on investment as cookie-driven advertising, there’s a need to plug the funding gap fast.

‘Consent or pay’ – compliant or not compliant?

In the UK, the ICO hasn’t decreed whether ‘consent or pay’ is a fair approach or not. It’s asked for feedback, and in doing so set out its initial ‘view’.

While stating UK data protection law doesn’t prohibit ‘consent or pay’, the Regulator says organisations must focus on people’s interests, rights and freedoms, making sure people are fully aware of their options in order to make free and informed choices. It’s worth noting that in the EU, ‘consent or pay’ is not prohibited either.

The ICO has set out four areas which need to be addressed when adopting this model, and has asked for feedback on any other factors which should be taken into account.

1. Imbalance of power

The ICO says consent for advertising will not be freely given in situations where people have little or no choice about whether to use a service or not. This could be where the provider is a public service or has a ‘position of market power’.

2. Equivalence of services

If the ad-free service bundles in other additional ‘premium’ extras, this could affect the validity of consent for the ad-funded service.

3. Appropriate fee

Consent for targeted advertising is, in the ICO’s view, unlikely to be freely given if the alternative is an “unreasonably high fee”. The Regulator is suggesting the fee should be set at a level which gives people a realistic choice between the options.

4. Privacy by design

Any consent request choices should be presented equally and fairly. The ICO says people should be given clear, understandable information about each option. Consent for advertising is unlikely to be freely given if people don’t understand how their personal information is going to be used.

Another key consideration is how people can exercise their right to withdraw their consent. The ICO reiterates it must be as easy for people to withdraw their consent as it is to give it. Organisations also need to make sure users can withdraw their consent without detriment. This may be a tricky circle to square.

In all of this there’s an important point – whilst consent must be ‘freely given’ under EU/UK data protection law, this doesn’t translate into meaning people must get content and services free too. The ‘consent or pay’ model, essentially offers a choice between pay with your data, or pay with your money.

Etienne Drouard is a Partner at Hogan Lovells (Paris) and his view is; “The very nature of consent is being offered an informed choice. ‘Pay or OK’ ( ‘Pay or Consent’) is, per se, a valid alternative. It requires a case-by-case and multi-disciplinary analysis. Not a ban.”

Have your say – UK ICO Call for Feedback on Consent or Pay

Time to plan ahead

Fedelma Good, Data Protection and ePrivacy Consultant, and former board member of the UK Data & Marketing Association, urges advertisers and publishers to plan ahead; “To say that online advertising is entering a period of turmoil is putting it mildly. Combining the issues of ‘consent or pay’ with Google’s cookie deprecation plans and you have an environment of uncertainty which advertisers and publishers alike will ignore at their peril. My advice to anyone reading this article is not only to track developments in these areas carefully, but perhaps more importantly to make sure you understand your own circumstances and options and plan ahead.”

Privacy and consumer rights groups

It’s clear privacy and consumer rights groups are pushing for change. Back in 2021 cookie banners were the focus, with the privacy rights group firing off hundreds of complaints to companies for using ‘unlawful banners’. The group developed software to recognise various types of unlawful banners and automatically generate complaints.

Max Schrems, Chair of noyb said: “A whole industry of consultants and designers develop crazy click labyrinths to ensure imaginary consent rates. Frustrating people into clicking ‘okay’ is a clear violation of the GDPR’s principles. Under the law, companies must facilitate users to express their choice and design systems fairly. Companies openly admit that only 3% of all users actually want to accept cookies, but more than 90% can be nudged into clicking the ‘agree’ button.”

Now the attention has turned to ‘consent or pay’, Meta’s use of this model has led to eight consumer rights groups filing complaints with different data European data protection authorities. The claims focus on concerns Meta makes it impossible for consumer to know how the processing changes if they choose one option or another. It’s argued the choice given is meaningless.

The fundamental right to conduct business

There’s a complex balance here between people’s fundamental privacy rights and the fundamental right to conduct business. For publishers and other online services, advertising is a crucial element of conducting business. In the distant past, advertising was expensive.

As Sachiko Scheuing European Privacy Officer at Acxiom & Co Chairwoman, FEDMA succinctly puts it; “Advertising used to be a privilege enjoyed by huge brands. Personalised advertisement democratised advertising to SMEs and start-ups.”

The growth of the internet and the advent of personalised advertising technologies has undoubtedly made digital advertising affordable and effective for smaller businesses and not-for-profits.

Well-established brands are more likely to be able to put up a paywall. People already trust their content, or enjoy their service and are prepared to pay. There’s a risk lesser-known brands and start-ups won’t be able to compete.

Is credible journalism under threat?

A Data Protection Officer at one premium UK publisher, who wishes to remain anonymous, fears the drive for cookie compliance risks damaging the ability to produce high quality journalism.

“In the face of unprecedented industry challenges, as more content is consumed on social media platforms, the vital ad revenues that support public interest journalism are under threat from cookie compliance, of all things. It seems like data regulators either don’t understand, or don’t care, about the damage they’re already inflicting on the news media’s ability to invest in journalism.

If publishers comply and implement “reject all” they lose ad revenue through decimated consent rates. If they fight their corner, they face enforcement action. Either way, publishers are emptying already dwindling coffers on legal fees, or buying novel consent or pay solutions.

Unless legislative change comes quickly, or the regulators realise that cookie compliance should not be an enforcement priority, local and national publishers may disappear, just at a time when trusted sources of news have never been more needed.”

Broader societal considerations

There’s a risk as more content hides behind paywalls, we’ll create a world where only those who can afford to pay will be able to access quality, trustworthy content.

‘Consent or Pay’ may be far from perfect, but it does allow people who can’t afford to pay to have equal access to content and online services. Albeit they get tracked, and those who have money to spend can choose to pay and go ad-free.

If the consent or pay model fails, and cookie-less solutions fail to deliver a credible alternative, I fear more decent journalism will go completely behind pay walls . If that’s the only option to plug the funding gap.

I am in my mid-50s and can afford to pay. My son, in his late teens, can’t. I worry poor quality journalism, fake news and AI-generated dross might soon be all he and his generation will be able to access. That’s not to say there isn’t some great user-generated content out there. But it does mean having difficult and honest conversations about regulation and the right of businesses to make a profit in an age of politicised, fraudulent and bogus online content.