The EU Court by the decision issued on July 17th 2024 (case T-1077/23) rejected the appeal brought by Bytedance Ltd – parent company of TikTok – confirming that this company is to be considered a gatekeeper pursuant to the EU Digital Markets Act (EU Reg. 2022/1925, so-called DMA) and, as such, is subjected to obligations and prohibitions imposed by the new regulations.
Gatekeepers in the Digital Markets Act
The DMA – Digital Markets Act –, which entered into force on November 1st 2022, aims to promote the offer of digital services of good quality and fair priced to consumers, through a set of rules aimed at guaranteeing the competitiveness of the digital market. For this purpose, the DMA limits the commercial practices of gatekeepers, that is big platforms that – by surpassing certain quantitative thresholds – occupy a privileged position on the market.
In particular, a company is considered a gatekeeper when:
- it has a significative impact within the internal market, in other words, it reaches an annual turnover in the EU equal to or higher than € 7.5 billion in each of the last 3 financial years;
- It provides a base platform service which constitutes an important gateway for business users to reach final users, that is if in the EU it reaches monthly at least 45 million active final users and annually in the EU at least 10.000;
- It has an entrenched and durable position in its operations, or it is foreseeable that it would acquire such position in the future.
After having examined the data communicated by the single platforms, on September 5th 2023 the EU Commission has identified the 6 companies that, according to the DMA, are to be considered as gatekeepers: Alphabet (Google’s holding), Amazon, Apple, Meta (Facebook), Microsoft and Bytedance (TikTok).
The Appeal of Bytedance
The company appealed the decision of the Commission before the EU Court, stating to not have surpassed the parameters provided by the DMA and therefore to not be qualifiable as gatekeeper.
First of all, in the appeal, Bytedance pointed out to not have a significant impact on the EU internal market, given that its market value would origin mainly from activities carried out in China.
In addition, the company stated to not be an important gateway to allow business users to reach their final users and to not have a consolidated and lasting position, if compared to other platforms as Facebook and Instagram, highlighting to have been present on the market only since 2018.
The decision of the EU Court
The Court rejected the argumentations of Bytedance as the evaluation carried out by the Commission were considering legitimate. On this regard, the Court concluded that Bytedance did surpass all quantitative thresholds provided by the DMA as, with respect to the first parameter, the financial capacity of Bytedance can be presumed from the global high market value associated to the broad number of users in the EU.
With respect to surpassing the second and third parameter, the evaluations of the Court took into consideration precisely the main competitors of TikTok as benchmark: it has been shown that starting from its launch in the EU in 2018, TikTok managed to increase its number of users very rapidly and exponentially, reaching in a very short time half of the dimensions of Facebook and Instagram and a particularly high engagement rate, mainly among young users, despite the launch of competing services such as Reels and Shorts.
Therefore, Bytedance remains a gatekeeper and will have to comply with the obligations and prohibitions imposed by the DMA.
Ilaria Feriti