TikTok Challenges “Gatekeeper” Status in E.U.’s Digital Markets Act

Following a similar move by Meta, TikTok has taken a stand against its “gatekeeper” status under the Digital Markets Act (DMA)Meta initiated the challenge against the gatekeeper status for its Messenger and Marketplace platforms on Wednesday, November 15.

The tech giant decided it would not appeal against the designation for its major platforms, Instagram, WhatsApp, and Facebook. 

For context, DMA is a pivotal E.U. law imposing stricter regulations on tech giants and facilitating user migration among competing services. The DMA, implemented in September, identified 22 “gatekeeper” services operated by six tech behemoths: Microsoft, Apple, Google, Amazon, Meta, and ByteDance’s TikTok.

Microsoft, Google, and Amazon accepted their “gatekeeper” designations without contest. Apple has yet to reveal whether it will accept or contest the designation. On the other hand, Meta is challenging the status of its Messenger and Marketplace. 

TikTok’s recent appeal demonstrates the industry’s ongoing struggle with regulatory oversight. The social media firm based its appeal on the concern that its designation might inadvertently undermine the DMA’s intended purpose.

This is basically by shielding established players from emerging competitors like itself. 

The platform, operational in Europe for just over five years, asserts that it is a formidable challenger rather than a gatekeeper. The company contests that it does not meet the DMA’s revenue threshold for the European Economic Area, which stands at 7.5 billion euros ($8.13 billion) annually. 

According to the DMA, entities with more than 45 million monthly active users and a market capitalization exceeding 75 billion euros are deemed gatekeepers offering core platform services. 

With its 134 million monthly users, TikTok argues that its gatekeeper status primarily hinges on ByteDance’s global market capitalization. This is heavily influenced by business lines not operating within Europe.

Challenges Arising from Global Market Capitalization

TikTok’s appeal highlights a significant concern related to the DMA’s methodology in determining gatekeeper status. 

The company emphasizes that its global market capitalization, driven by ByteDance’s diverse business portfolio, inaccurately positions TikTok as a gatekeeper in the European market. 

ByteDance, TikTok’s parent company, recently repurchased shares from U.S. employees in a transaction that pushed the company’s valuation to $223.5 billion. This illustrates the complexity of assessing market influence and dominance.

One key argument put forth by TikTok revolves around its status as a challenger rather than an incumbent in the digital advertising space. The platform contends that its designation as a gatekeeper lacks a comprehensive market investigation by the European Commission. 

With over 134 million monthly users, TikTok asserts its position as a dynamic force in digital advertising. This has made regulators consider its relatively short European operational history compared to more established players.

The DMA, designed to curb the dominance of tech giants and foster a competitive digital landscape, has prompted varying responses from industry leaders. While Apple has yet to comment, it has until November 16 to express its intentions regarding the DMA.

As the tech industry grapples with evolving regulatory frameworks, these appeals and challenges illuminate the complexities of defining market influence. TikTok’s appeal highlights the need for a nuanced approach to evaluating the status of platforms.

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