EU Court upholds Commission decision to designate TikTok parent as gatekeeper

The EU Court of Justice upheld on Wednesday (17 July) the European Commission’s decision to designate TikTok’s parent company Bytedance as a gatekeeper under the Digital Markets Act, dismissing all arguments presented by the company.

The affirmation by the General Court of Bytedance as a gatekeeper reinforces EU efforts to regulate dominant tech companies. The General Court is a constituent court of the Court of Justice of the EU.

The EU’s Digital Markets Act (DMA) targets digital competition by designating gatekeepers to ensure fair competition in key internet sectors. Some of the gatekeepers include Alphabet, Apple, Meta, Amazon, and Microsoft.

The European Commission designated Bytedance, TikTok’s parent company, as a gatekeeper last September, which the Chinese company appealed last November.

ByteDance wrote in a post at the time that its application does not hold an “entrenched” position, is not an incumbent in the digital advertising market, and does not meet the European Economic Area revenue threshold of the law.

The General Court dismissed Bytedance’s challenge, arguing that its potential to monetise users and its consolidated position justify the Commission’s designation.

“We are disappointed with this decision,” a TikTok spokesperson told Euractiv, adding that the platform challenges established players and plays a crucial role in fostering competition.

“While we assess our next steps, we have already taken measures to comply with the DMA’s obligations well ahead of the March deadline,” the spokesperson said.

The European Consumer Organisation (BEUC), an umbrella group representing consumers across 31 European countries, welcomed the Court’s ruling, emphasising ByteDance’s obligation to comply with DMA regulations on personalised advertising consent, bolstering user privacy.

Dismissed claims

Bytedance had argued that it did not meet the DMA’s revenue criteria to be a gatekeeper, which is €7.5 billion per year in the European Economic Area.

But the Commission is “entitled” to consider “Bytedance’s high global market value” along with “the large number of TikTok users” in the EU, reflect its “financial capacity and its potential to monetise those users,” said the Court.

The Court also found TikTok’s rapid growth and high engagement rates in the EU significant. This countered Bytedance’s argument that it did not benefit from lock-in effects like other social media, meaning vendors or consumers are dependent on TikTok for service, according to the Court’s press release.

ByteDance argued that they were challengers in the market, unlike more established companies like Meta and Alphabet, who quickly gained ground with similar services such as Reels and Shorts, mimicking TikTok’s main features.

But TikTok’s rapid growth and substantial user base in the EU demonstrated that it has “consolidated its position,” said the court, dismissing the argument.

The Commission’s standard of proof, which refers to the level of evidence the EU executive needed to provide to justify its decision, was also deemed appropriate by the Court. Minor errors in the Commission’s assessment did not affect the overall decision’s legality.

Bytedance’s claims of rights infringement and unequal treatment were also dismissed.

[Edited by Zoran Radosavljevic]

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