TikTok and Meta challenge EU’s landmark digital rules

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Brussels is facing at least two legal challenges against its new landmark digital rules, as Meta and TikTok appeal against the EU’s attempt to make online markets more competitive.

TikTok, owned by China’s ByteDance, on Thursday challenged the EU’s decision to brand it a “gatekeeper” under the Digital Markets Act because such designation could hamper the company’s ability to grow.

TikTok appealed against the EU’s assumption that businesses are dependent on its services to reach customers, a key metric to be captured by the new rules.

The company also said that it did not meet the required thresholds to be caught by the legislation and that it did not have a fair chance to present its evidence.

Separately, Meta appealed on Wednesday against the EU’s decision to designate Facebook’s Messenger and Marketplace as “core” services

As part of its legal action before the courts in Luxembourg, Meta will argue that Messenger is a chat functionality of Facebook and as such not a separate app and therefore not a separate service.

People familiar with the appeal also said the company will argue that Marketplace is a consumer product and not a “gateway” for businesses to target consumers — a requirement to be captured by the DMA.

Meta said: “This appeal seeks clarification on specific points of law regarding the designations of Messenger and Marketplace under the DMA. It does not alter or detract from our firm commitment to complying with the DMA, and we will continue to work constructively with the European Commission to prepare for compliance.”

The commission, the EU’s executive arm, declined to comment.

The new obligations under the Digital Markets Act for the largest, mostly American, tech companies, strike at the heart of the way the likes of Apple and Meta generate billions of dollars in revenues in Europe each year. The legislation obliges companies to make their services interoperable with those of competitors for the first time and to open their closed ecosystems to competing services.

Apple and Amazon, which are also captured under the new law, are said to be considering an appeal ahead of Thursday’s deadline.

Separately, Microsoft and Google, whose services are also designated as “core” and face new obligations under the DMA, will not appeal against their designations, according to people with direct knowledge of their thinking.

The challenges by TikTok and Meta are the first against the Digital Markets Act but similar appeals against other legislation have rarely succeeded.

The DMA, set to come into force ​​in the first quarter of 2024, aims to break the stronghold that a handful of companies have on digital markets in the EU and make markets more open to competition. Detractors of the rules argue that more regulation will lead to less innovation and that will ultimately undermine the ability of European digital companies to thrive.

Companies have until March 6 to comply with the new rules. Their appeals, however, do not enable them to escape from complying with the legislation. A court in Luxembourg is expected to rule on the appeals in a matter of months rather than years as has been the case traditionally with antitrust investigations.