• The CJEU ruled on 17 July to reject ByteDance’s appeal against the EU’s decision to recognise it as a “gatekeeper”.
  • The court said ByteDance met the DMA’s quantitative criteria of global market capitalisation, the number of users in the EU and the number of years since the threshold was reached.

OUR TAKE
ByteDance has lost a key legal dispute with EU regulators. The parent company of TikTok failed to win in court against the EU’s decision to label it as a “gatekeeper” under the Digital Markets Act (DMA). The ruling has attracted a lot of attention, not only because it will have a direct impact on ByteDance’s operations in the European market, but also because it could herald similar regulatory challenges for more tech companies.
–Elodie Qian, BTW reporter

What happened

The Court of Justice of the European Union (CJEU) ruled on 17 July to reject ByteDance’s appeal against the EU’s decision to recognise it as a “gatekeeper”.

Alphabet (Google’s parent company), Amazon, Apple, ByteDance, Meta and Microsoft were identified for the first time as the six “gatekeeper” firms last September. It was reviewed by the EU according to the Digital Marketplace Act. These companies were identified as providing core platform services such as social networks and search engines.

Under the EU’s Digital Markets Act (DMA), tech giants identified as “gatekeepers” must allow their messaging apps to interoperate with rivals, let users decide which apps are pre-installed on their devices, and must not favour their own services. ByteDance has argued that this designation could undermine the goals of the DMA, as the act is designed to protect emerging competitors, such as TikTok, which has yet to establish a solid position.

The Luxembourg-based General Court upheld the European Commission’s decision and rejected ByteDance ‘s appeal, finding that the company had failed to sufficiently prove its point. The court said that the European Commission had every reason to consider ByteDance as a “gatekeeper”.

The court noted that ByteDance met the DMA’s quantitative criteria of global market capitalisation, the number of users in the EU and the number of years since the threshold was reached.

In addition, the Court emphasised TikTok’s rapid rise to rival its competitors under Meta and Alphabet. The Court said that TikTok has rapidly consolidated and strengthened its position in a short period of time, even in the face of rivals such as Reels and Shorts, and that it has reached half the number of EU users of Facebook and Instagram.

Also read: TikTok is bringing its dedicated STEM feed to Europe

Also read: EU threatens to ban TikTok Lite from using rewarded viewing feature

Why it’s important

“Gatekeeper” companies are large companies providing “core platform services” such as social networks, search engines, etc., with a market capitalisation of at least €75 billion ($82 billion) or an annual turnover of €7.5 billion ($8.2 billion), and a minimum of 45 million end-users per month and 10,000 business users per year in the EU.

They also need to have at least 45 million end-users per month and 10,000 business users per year in the EU. If they breach the Digital Marketplace Act, they face fines of up to 10% of their global annual turnover for the previous financial year and up to 20% for further offences.

The EU DMA has been in force since May 2023. The Act establishes criteria for “gatekeeper” firms based on market capitalisation, annual turnover in EU countries and number of active users, and lists 10 “core platform services” that may be covered by “gatekeeper” firms.

“Core platform services” include: application shops, online search engines, social networking services, specific messaging services, video sharing platform services, virtual assistants, web browsers, cloud computing services, operating systems, online marketplaces and advertising services.

The DMA focuses on offences committed by head-platform companies, with an emphasis on guaranteeing fair competition in the digital marketplace and ensuring greater choice for consumers.

The DMA, which targets tech giants, makes the EU the first jurisdiction in the world to set comprehensive standards for regulating the digital space.