Meta and TikTok have become the first companies to challenge the nature of the “gatekeeper” status assigned to them by the EU as part of the new Digital Markets Act, which gives the EU powers to police how Big Tech businesses sell their own products and services in Europe.
Facebook parent company Meta is bringing action in a court in Luxembourg because it says two of its products should not be included in the scope of the act, while TikTok’s Chinese owner, ByteDance, is also beginning a legal appeal. The pair are two of six gatekeeper companies designated to fall under the act. It has been reported that two of the other four gatekeepers – Google and Microsoft – will not challenge their status, while the remaining duo, Apple and Amazon, are said to be considering their options. The deadline to appeal against the gatekeeper designation is today.
Digital Markets Act: Meta and TikTok voice concerns
The Digital Markets Act is designed to encourage fair competition by putting conditions on gatekeepers, defined as companies that provide digital marketplaces and also act as participants in those markets. The EU has introduced the legislation amid fears that these companies abuse their position, and the data available to them, to unfairly promote their own products at the expense of those of third-party sellers.
A list of gatekeeper companies was announced in September, with the six businesses given six months to comply with the demands of the act. The European Commission says it will monitor whether they have done this, and has the power to fine gatekeepers up to 10% of their global turnover for non-compliance, as well as impose other remedies.
Meta’s contention is that Facebook Messenger and Facebook Marketplace should not be designated “core” services under the act, as they are both consumer products and not a way for businesses to target potential customers. ByteDance, meanwhile, argues that TikTok is not a core service because businesses do not rely on it to reach their clients.
A spokesperson for Meta said the company accepts its status as a gatekeeper, but explained: “This appeal seeks clarification on specific points of law regarding the designations of Messenger and Marketplace under the Digital Markets Act. It does not alter or detract from our firm commitment to complying with the Digital Markets Act, and we will continue to work constructively with the European Commission to prepare for compliance.”
ByteDance, meanwhile, said: “We fully support the principles of the DMA, which aims to better enable challengers to compete with incumbent players. Indeed, our appeal is based on the belief that our designation risks undermining the DMA’s own stated goal by protecting actual gatekeepers from newer competitors like TikTok.
“Far from being a gatekeeper, our platform, which has been operating in Europe for just over five years, is arguably the most capable challenger to more entrenched platform businesses.”
The company has published a lengthy blogpost outlining its concerns in full.
UK waters down its own digital markets legislation
Meanwhile, the UK government is set to water down its own digital markets bill, with Big Tech companies being given more powers to challenge competition decisions against them.
Under changes to the Digital Markets, Competition and Consumers Bill, announced yesterday, it will introduce a “targeted and proportionate regulatory regime to address concerns around competition in the digital industry while ensuring that the UK remains one of the best places to invest in and innovate new technology.”
The government says the amendments will maintain the current appeals process for all regulatory decisions, except fines, on the basis of judicial review principles. This will apparently mean that “eligible tech firms can challenge regulatory decisions on proportionality grounds through this process”.
By taking this approach, the government hopes to work with tech companies to address concerns and avoid any costly and time-consuming legal challenges that might arise. It also says companies will be able to challenge any fines handed out under the legislation “on their merits”. A spokesperson said that these changes “allow firms to challenge fines on the substance of the decision, as well as the process to reach that decision”. As with the European legislation, fines for large tech businesses found to be in breach of the bill could run into billions of pounds.
Saqib Bhatti, a minister in the Department for Science, Innovation and Technology (DSIT), claimed that the changes the government is making “ensure that the regulator takes proportionate action and avoids undue regulatory burdens while remaining accountable for decisions that will have far-reaching economic consequences”.
“Following extensive engagement across the technology industry, amendments proposed by the government today make sure that the regulator’s interventions will always be proportionate to addressing the harm being caused to consumers and competition.”
The bill is continuing to be scrutinised by UK MPs and Lords, having been carried over from the last session of parliament in the King’s Speech. Speaking in the House of Lords in July, former DSIT minister Paul Scully said that the government did not intend to “bash” Big Tech with the legislation. Even so, the changes proposed this week are unlikely to dampen the concerns of opposition MPs who fear the legislation doesn’t go far enough in giving regulators the power to tackle breaches.