Today, we are appealing the European Commission's decision to designate TikTok* a 'gatekeeper' under the new Digital Markets Act (DMA) legislation.
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.
More specifically, we take issue with a number of aspects of the designation (and the designation process itself), including the following:
TikTok does not hold an 'entrenched' position
According to the DMA, gatekeepers hold an 'entrenched and durable' position within a market. While we are optimistic about the current and future strength of our business, we continue to face intense competitive pressure from some of the world's largest and most successful companies.
Some of these have already leveraged their existing market advantage to imitate our core product experience, quickly gaining significant scale that it took us years to build. While the DMA is designed to prevent gatekeepers from doing this, the European Commission will not stop these defensive imitations. With this designation, it has instead decided to put these competitive limits on TikTok.
Far from being entrenched, TikTok must invest to remain competitive and grow. The gatekeeper designation could hamper our ability to do this.
TikTok is a challenger, not an incumbent, in the digital advertising market
Another requirement under the gatekeeper designation is that businesses are 'dependent' on the gatekeeper in question to reach customers. Businesses operating in Europe can already access some of the world's most ubiquitous platforms to do just this - it is difficult to argue there is such a dependency on us, especially given our TikTok for Business proposition only launched in Europe in 2021.
Furthermore, the European Commission has elsewhere found some of these other platforms to be dominant, including in social networking. Incidentally, this is also the 'core platform service' category in which we believe TikTok was wrongly designated, given our platform's content-led nature.
It is well known that a small number of platform businesses account for the vast majority of digital advertising revenues and coupled with their ability to monetise across multi-service ecosystems, these same businesses monopolise industry profits.
TikTok is a recent entrant to the digital advertising space and this designation diminishes the prospect of mounting an effective challenge in an area that has long been dominated by a handful of players.
TikTok does not meet the EEA revenue threshold the DMA has set
TikTok is the only service designated under the DMA that does not meet the law's threshold for revenues generated in the European Economic Area (€7.5 billion per annum). Instead, TikTok was designated a gatekeeper based on its parent company's global market capitalisation – a figure that is based not only on TikTok's commercial performance in the region, but also primarily on the performance of business lines that do not even operate in Europe.
TikTok did not have an opportunity to present its evidence
Designating TikTok a gatekeeper on the basis of such selective information also extends to the process of the designation decision itself. Other platforms in a similar situation to TikTok were granted a market investigation by the European Commission. No market investigation was conducted in relation to our designation, while the extensive evidence we provided in our rebuttal submission was not accepted. The result is a designation decision based on inaccuracies and errors, to which we were not given the opportunity to fully respond.
TikTok embraces relevant obligations
Over 134m people across Europe come to TikTok every month and we recognise that with such scale comes great responsibility. We take our relevant obligations here extremely seriously, as seen by the recent introduction of the Digital Services Act (DSA) - over 6,000 people are moderating European content as part of our ongoing efforts to keep our community safe and comply with this critical legislation.
Multiple studies and findings** agree that TikTok is a challenger bringing important new competition to the space. The designation decision is based on a fundamental misunderstanding of our business and threatens our ability to grow and compete with true gatekeepers - put simply, it risks protecting the very monopolies that the law intended to open up.
*While the European Commission has officially designated ByteDance Ltd. as a gatekeeper, this is on the basis of the activity of the TikTok service only - for clarity, this post therefore refers to TikTok.