ByteDance confirmed as digital gatekeeper

In the first substantive judgment on the Digital Markets Act (DMA), the European General Court (GC) has today upheld ByteDance's designation as a gatekeeper. 

ByteDance was designated as a gatekeeper in respect of its social networking platform TikTok in the first wave of designations back in September 2023, having met the quantitative thresholds under the DMA and failed to convince the Commission that it should nevertheless not be designated.  It appealed the gatekeeper designation to the GC in November 2023. 

In a ruling under the expedited procedure, the GC has today upheld the designation. In its appeal, ByteDance had not disputed that it met the quantitative thresholds under the DMA (leading to a presumption of its gatekeeper status), but rather that the Commission was wrong to dismiss its arguments rebutting that presumption. The GC found that ByteDance's arguments were “not sufficiently substantiated so as manifestly to call into question the presumption”. In particular:

• Significant impact on internal market - The GC rejected ByteDance's argument that the fact its global market value (which exceeded the relevant threshold for presuming a significant impact on the internal market) was mainly attributable to its activities in China while its EU turnover was low showed that it did not have a significant impact on the internal market. While acknowledging that low EU turnover might in certain circumstances demonstrate a lack of significant impact on the internal market, the GC found that the Commission was entitled to consider that ByteDance's high global market value, combined with the large number of TikTok users in the EU, reflected its financial capacity and its potential to monetise those users in the near future (and therefore shows its significant impact on the internal market). 
• TikTok as an important gateway for business users to reach end users - The GC also rejected ByteDance's argument that, because it did not have an ecosystem or network or lock-in effects, and because TikTok was smaller than some other online social networks, TikTok was not an important gateway for business users to reach end users. In this respect the GC noted that since its launch in the EU in 2018 TikTok has grown rapidly, has reached half the size of Facebook and Instagram, and has particularly high engagement from young users.
• Entrenched and durable position - The GC was also not convinced by ByteDance's arguments that it did not have an entrenched and durable position because its position had been successfully contested by rival services launched by Meta and Alphabet, and it was a challenger on the market contesting the position of gatekeepers. The GC noted in this respect that while TikTok was a challenger when it was first launched in the EU, it has rapidly consolidated, and even strengthened, its position.

The GC also found that the Commission was right to reject a number of “additional” arguments put forward by ByteDance on the basis they did not relate directly to the quantitative presumptions. It also rejected arguments from ByteDance that the Commission had applied the wrong standard of proof and had infringed ByteDance's rights of defence and the principle of equal treatment.

TikTok will now no doubt be considering its next steps. In the meantime, it will need to continue to comply with its gatekeeper obligations under the DMA.