July 18, 2024 – In a landmark decision, the Court of Justice of the European Union (CJEU) upheld the European Commission’s classification of ByteDance as a “gatekeeper” under the Digital Markets Act (DMA), dismissing the company’s appeal against the ruling. This victory for the EU’s antitrust watchdog underscores its commitment to reigning in the power of tech giants.
Under the DMA, designated “gatekeepers” are mandated to facilitate interoperability between their messaging services and competitors, empower users to choose preinstalled apps on their devices, and refrain from favoring their own services. ByteDance had argued that this categorization undermines the DMA’s objective of nurturing emerging competitors, as TikTok, it contended, is precisely such a nascent player without a firmly entrenched position.
The Luxembourg-based General Court upheld the Commission’s stance, rejecting ByteDance’s appeal due to insufficient evidence presented by the company. The Court emphasized that the Commission had valid reasons to designate ByteDance as a “gatekeeper,” citing the company’s fulfillment of DMA’s quantitative criteria pertaining to global market capitalization, EU user base, and the duration of user numbers exceeding the specified thresholds.
Furthermore, the Court highlighted TikTok’s meteoric rise, positioning it on par with competitors under Meta and Alphabet, despite the presence of formidable rivals like Reels and Shorts. Remarkably, TikTok has swiftly consolidated its position, amassing half the EU user base of Facebook and Instagram, even amidst intense competition.
Last September, the European Commission, invoking the DMA, initially designated six companies – Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft – as “gatekeepers,” covering 22 core platform services they offer. The DMA imposes obligations on large online platforms, requiring them to grant business users access to data generated on their platforms, facilitate product promotion, and enable transactions with customers outside their ecosystems.
“Gatekeeper” enterprises, defined as those offering core platform services like social networks and search engines, must meet stringent criteria, including a market capitalization of at least €75 billion or an annual turnover of €7.5 billion, alongside maintaining at least 45 million monthly active end-users in the EU and serving 10,000 business users annually. Non-compliance with the DMA entails hefty penalties, amounting to up to 10% of the company’s global annual turnover in the preceding financial year, with repeat offenders facing fines of up to 20%.
Previously, ByteDance, Apple, and Meta had all challenged their designation as “gatekeepers” by the EU, with the recent CJEU ruling marking a definitive conclusion to ByteDance’s legal battle.