TikTok lost its bid to escape European Union digital market rules on Wednesday when the bloc's General Court found the social media platform's global market value indicates significant potential to profit from European users.

TikTok's EU User Base and Gatekeeper Status

In 2022, TikTok had 125 million users in the EU, surpassing the threshold for its parent company, ByteDance Ltd., to be labeled a "gatekeeper" alongside Alphabet, Amazon, Apple, Meta, and Microsoft. The Digital Markets Act (DMA) mandates that gatekeepers must comply with regulations designed to curb the power of big tech. The General Court upheld the European Commission's decision to grant ByteDance this label, stating the company's value and user base reflect its financial capacity and potential to monetize TikTok users in the EU, impacting the internal market.

TikTok Loses 1st Challenge Against EU Big Tech Law : Digital Markets Act Compliance

Finalized in 2022, the DMA requires services considered crucial gateways for businesses to reach end users to follow rules intended to prevent unfair advantages. Gatekeepers under the DMA must offer users more choices, ensure platforms do not favor their own services, and maintain transparency for business users.

The court dismissed ByteDance's argument that its global market value stemmed mainly from its activity in China, unrelated to the EU market. The €75 billion ($82 billion) market value requirement under the DMA does not distinguish geographical origins.

TikTok's Market Position and Competitors

ByteDance contended that TikTok's scale was smaller than other social networks like Facebook and Instagram, making it less of a gateway. However, the General Court highlighted TikTok's rapid and significant growth in the EU, noting it reached nearly half the size of Facebook and Instagram since its international launch in 2017.

ByteDance also argued that competitors Meta and Alphabet successfully challenged TikTok with their video services, Reels and Shorts, indicating ByteDance was more of a challenger than a gatekeeper. The General Court countered that being a challenger and a gatekeeper are not mutually exclusive, stating TikTok's exponential growth and revenue far exceeded the DMA's thresholds.

TikTok Loses 1st Challenge Against EU Big Tech Law : Court's Judgment and Next Steps

The General Court acknowledged the commission's error in deeming ByteDance's EU turnover from the past three years irrelevant, but this did not affect the commission's overall conclusion. A TikTok spokesperson expressed disappointment with the decision and said the company would evaluate its next steps, noting that it has already taken measures to comply with the DMA.

In February, the General Court rejected ByteDance's request to pause its gatekeeper status ahead of a March deadline to comply with new DMA obligations, finding the company failed to demonstrate a real risk of irreparable harm if the designation remained while its challenge was pending.

ByteDance is represented by E. Batchelor, N. Baeten, and M. Frese. The European Commission is represented by O. Gariazzo, M. Mataija, I. Rogalski, and C. Sjödin.