Bytedance Loses Appeal: TikTok Confirmed as Digital Gatekeeper Under EU's Digital Markets Act
The Chinese Bytedance Group, which operates the video portal TikTok, recently failed in its legal challenge against being classified as a digital gatekeeper. On July 17, 2024, the General Court of the European Union in Luxembourg dismissed the action. Consequently, Bytedance must now adhere to the stricter regulations of the Digital Markets Act (DMA).
The Digital Markets Act (DMA): Ensuring Fair Competition
The Digital Markets Act (DMA) aims to foster fair competitive conditions within the digital sector. It establishes stringent rules for major tech companies designated as "gatekeepers." These companies include not only Bytedance but also Alphabet (Google), Amazon, Apple, Meta (Facebook), and Microsoft. The DMA's primary goal is to safeguard the rights of smaller businesses and consumers, while simultaneously curbing anti-competitive behavior. For more information on similar EU digital regulations, you can read our article on the Digital Services Act (DSA).
Bytedance's Classification as a Gatekeeper
The EU Commission officially designated Bytedance as a gatekeeper in September 2023. Bytedance subsequently initiated legal proceedings against this decision. The company argued that, unlike other gatekeepers, it still viewed itself as a challenger without an established market position in Europe.
However, the EU Court rejected this argument. It determined that despite intense competition from Meta and Google, TikTok has rapidly amassed a substantial user base in the EU, particularly among young people. This substantial reach confirms TikTok's role as a crucial gateway for commercial users to access end-users, thus solidifying Bytedance's market position.
Impact of the Gatekeeper Ruling on Influencers and Users
As a designated gatekeeper, Bytedance is now compelled to comply with the rigorous provisions of the DMA. These obligations include:
- Explicit consent from users for the use of personal data for advertising.
- Enhanced transparency regarding data processing practices.
- Users' right to refuse or withdraw their consent at any time.
- Fair and balanced contract terms for commercial users, such as influencers.
- Disclosure of criteria used for rankings and content recommendations.
For influencers, this ruling signifies more equitable terms, increased transparency, and a more balanced power dynamic with the platform. It remains to be seen how these changes will manifest in practice. Our article "Making influencer marketing legally compliant" offers a comprehensive overview of the rights and obligations relevant to influencers.
Conclusion
This ruling reinforces the protection for influencers and users on TikTok under the DMA. Bytedance now faces significant penalties for any violations, which could even include being compelled to divest parts of the company. An appeal against this decision can still be filed with the European Court of Justice. The future developments of this case and its broader implications for other major tech companies will undoubtedly be closely watched.