TikTok owner Bytedance has failed to get itself removed from the list of ‘gatekeeper’ platforms that are subject to extra regulation in the European Union under the Digital Markets Act. An EU court has rejected arguments put forward by Bytedance that it isn’t big or dominant enough to be regulated in the same way as companies like Apple and Google owner Alphabet.
Unsurprisingly, Bytedance says it is “disappointed with this decision”. TikTok, it reckons, “is a challenger platform that provides important competition to incumbent players”. Bytedance will now review its options and could as yet appeal this ruling, although, it adds, “we already took measures to comply with the relevant obligations of the DMA ahead of last March’s deadline”.
The EU passed two major pieces of regulation in the digital market in 2022, the Digital Services Act which sets out how digital platforms should deal with harmful content, and the DMA that seeks to stop the biggest players from exploiting their market dominance.
The European Commission last year identified the gatekeeper platforms that would be subject to extra regulation under the DMA, they being the platforms which the EC believes “provide an important gateway between businesses and consumers in relation to core platform services”.
Alongside Apple, Alphabet and Bytedance were Amazon, Meta and Microsoft. The operator of Booking.com was subsequently also added to the list.
Opposing its classification as a gatekeeper platform, Bytedance presented a number of arguments to the court. First, it argued that most of its global market value comes from its operations in China, not the EU. The court said that was irrelevant, because TikTok has a high user-base in Europe, and its EU operations benefit from that market value worldwide.
Second, Bytedance said it “did not have an ecosystem” or “network”, or benefit from “lock-in effects”, and that - in terms of users - TikTok is not as big as Facebook and Instagram. Which may be true, but, the court said, TikTok “succeeded in increasing its number of users very rapidly and exponentially”, and enjoys "a high engagement rate, with young users in particular”.
Third, Bytedance argued that TikTok is a challenger in the digital market, providing rather than hindering competition. Again, that is true, but the court said TikTok had “rapidly consolidated its position” and subsequently “strengthened that position”, despite Meta’s Instagram and Alphabet’s YouTube competing head on with copy-cat services Reels and Shorts.
Therefore, says the EU court, the Commission was right to classify Bytedance as a gatekeeper platform.
While politicians wanting more competition in a digital marketplace where TikTok is now a major player has resulted in more regulation for Bytedance to navigate in Europe, it could actually help the China-based company in the US.
There, of course, TikTok is facing an outright ban early next year because of concerns the Chinese government has access to user-data via Bytedance. However, if Donald Trump wins this year’s presidential election he could seek to overturn that plan, despite having tried to ban TikTok himself during his first presidency.
In an interview with Bloomberg this week, Trump said “I’m for TikTok”, on the basis that “you need competition”, and if TikTok is banned in the US he fears that Meta’s Facebook and Instagram will fill the gap, becoming even more powerful.