On Wednesday, July 16, the second-highest court of the European Union rejected the appeal filed by ByteDance, the parent company of TikTok. ByteDance had appealed to the EU to revoke the designation of the company as a “gatekeeper”.
In September 2023, the European Commission designated ByteDance as a “gatekeeper” company under the Digital Markets Act (DMA). According to the DMA, companies classified as “gatekeepers” must adhere to a set of regulations and prohibitions to ensure fair competition in the industry and provide consumers with more choices.
Under the EU’s Digital Markets Act, companies defined as “gatekeepers” must ensure that their instant messaging software is compatible with competitors’ software, allow users to choose which applications to pre-install on their devices, and prohibit these companies from favoring their own products in services at the expense of competitors.
In November 2023, ByteDance filed a lawsuit seeking to annul the decision to classify them as a “gatekeeper”. In response to ByteDance’s request, the EU General Court decided to rule on the case in a fast-track procedure and dismissed ByteDance’s lawsuit.
The ruling by the EU’s second-highest court is the first ruling on the scope of the EU’s Digital Markets Act. ByteDance can appeal to the Court of Justice of the EU, the highest judicial body in Europe.
The General Court in Luxembourg supported the European Commission’s viewpoint, stating that ByteDance had failed to provide sufficient evidence to support its appeal.
“The General Court dismissed the TikTok company’s lawsuit against the Commission’s designation as a ‘gatekeeper’,” the court stated in its ruling. “The Commission is fully entitled to consider ByteDance as a ‘gatekeeper’.”
The court pointed out that ByteDance met the quantitative criteria set forth in the Digital Markets Act, including the company’s global market value, the number of TikTok users in the EU, and the years in which the user thresholds were consistently met.
The Digital Markets Act sets jurisdictional thresholds for “gatekeepers”: digital companies operating in three or more European countries, with a market value exceeding 750 billion euros, or a turnover in Europe of 75 billion euros, and having at least 45 million active end-users and 10,000 business users in Europe.
ByteDance argued that TikTok had not yet established a strong foothold in the market.
The General Court noted that TikTok had experienced rapid growth and was on par with competitors like Meta Platforms and Alphabet. Judges stated, “In terms of the number of users within the EU, TikTok has reached half the scale of Facebook and Instagram.”
According to Reuters, ByteDance expressed disappointment with the ruling. A TikTok spokesperson said, “While we will evaluate the next steps, we have already taken action to fulfill the obligations of the Digital Markets Act before the deadline last March.”
Other companies designated as “gatekeepers” include Alphabet, Amazon, Apple, Booking.com, Meta Platforms, and Microsoft.
Meta, the parent company of Facebook, and Apple also filed appeals to ensure that some of their services are not restricted by the new regulations. The European court has yet to rule on the appeals from Meta and Apple.