Labeling newcomer TikTok as a gatekeeper defeats the purpose of DMA, TikTok says.
Apple has officially joined Meta and TikTok in appealing the European Union’s designation of their services as “gatekeepers” under the Digital Markets Act (DMA)—a strict EU antitrust law aimed at “preventing gatekeepers from imposing unfair conditions on businesses and end users” and “ensuring the openness of important digital services.”
On Friday, the EU Court of Justice confirmed the Apple appeal in a post on X. No other details about Apple’s legal challenge have been made public, Reuters reported. But last week, sources told Bloomberg that Apple’s appeal was expected to oppose gatekeeper status of its App Store, iOS operating system, and Safari browser. That report, however, noted that sources had only seen a draft of the appeal, which could have been edited ahead of filing.
Apple had previously argued that its App Store could be considered not one software application marketplace, but five distinct marketplaces offered across five devices: iPhones, iPads, Mac computers, Apple TVs, and Apple Watches. Following this logic, only the iOS App Store should be considered a gatekeeper, Apple argued. Ultimately, the EU disagreed, saying that the “nature, function, and usage of the different devices on which the App Store can be accessed” does not “alter the common purpose the App Store serves across all Apple’s devices.”
Similarly, Apple argued that its iOS operating system should not be designated as one single gatekeeper, but five distinct operating systems across the same five devices, and because each device required a uniquely designed operating system, the EU seemed to agree that only iOS met the threshold as a gatekeeper.
Finally, Apple similarly argued that its Safari browser is actually three different browsers accessed on three devices: iPhones, iPads, and Mac computers. According to Apple, Safari works differently on different devices depending on use cases, leading to different versions of Safari on each device, disputing Safari features like a sidebar that’s available on desktop that does not appear in Safari on mobile. The EU rejected Apple’s arguments, finding that Safari is a single web browser providing the same services “irrespective of the device.”Advertisement
Apple’s appeal came after Meta became the first to appeal gatekeeper status of its Messenger and Marketplace services on Wednesday, Reuters reported. According to Meta, its Facebook, Instagram, and WhatsApp services qualify as gatekeepers, but not other designated services that the social giant considers simply functionalities of Facebook—its Messenger and Marketplace services. Further, Meta argued that its Marketplace enables consumer-to-consumer services—which it said is different from businesses promoting outside services—and therefore, Meta contends that service falls outside the DMA’s scope.
That same day, ByteDance quickly followed suit, appealing TikTok’s gatekeeper status. According to a TikTok blog post, TikTok shouldn’t be designated as a gatekeeper because it’s a newcomer that “does not hold an ‘entrenched’ position.”
TikTok claimed that its services were entirely miscategorized by the European Commission because, unlike other companies, “no market investigation was conducted in relation to” TikTok’s designation.
“Multiple studies and findings agree that TikTok is a challenger bringing important new competition to the space,” TikTok’s blog said. “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.”
TikTok likely feels shirked because the Commission has conducted four market investigations “to further assess Microsoft’s and Apple’s submissions arguing that, despite meeting the thresholds, some of their core platform services do not qualify as gateways,” including Bing, Edge, Microsoft Advertising, and iMessages. Those ongoing investigations could delay designations of these services until next September, sparing Apple and Microsoft risks of infringement and “fines up to 10 percent of the company’s total worldwide turnover, which can go up to 20 percent.” The Commission also granted rebuttals from Google and Samsung, deciding not to designate services Gmail, Outlook.com, and Samsung Internet Browser as core platform services under the DMA.
Further, TikTok said it is the “only service designated under the DMA that does not meet the law’s threshold for revenues generated in the European Economic Area.” According to TikTok, the EU designated TikTok as a gatekeeper based on ByteDance’s global market capitalization, derived “primarily on the performance of business lines that do not even operate in Europe.”Advertisement
If the Commission had conducted a market investigation, TikTok suggested, its platform would never have been designated as a gatekeeper. Without the investigation, “the result is a designation decision based on inaccuracies and errors, to which we were not given the opportunity to fully respond,” TikTok’s blog said.
It’s unclear how successful Meta and ByteDance will be with their appeals. In earlier rebuttals, Meta and ByteDance have already argued against gatekeeper status for the services at the core of their appeals. The European Commission has said that only “exceptional circumstances” would enable a tech company that meets the threshold to avoid being designated as a gatekeeper.
Meta has said its appeal represents the company’s struggle to gain clarity about why Messenger and Marketplace should be designated as gatekeepers.
“This appeal seeks clarification on specific points of law regarding the designations of Messenger and Marketplace under the DMA,” a Meta spokesperson told Reuters. “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.”
TikTok has come out a bit stronger, warning the Commission that designating TikTok as a gatekeeper would contradict everything the DMA stands for.
“We fully support the principles of the DMA, which aims to better enable challengers to compete with incumbent players,” TikTok’s blog said. “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.”
Twenty-two services managed by six tech companies have so far been designated as gatekeepers under the DMA, including services from Google owner Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft. When the DMA takes effect on March 7, it will require companies with more than 45 million monthly active users and a market capitalization of 75 billion euros to allow third-party apps and app stores on their platforms and force platforms to make it easier for users to switch services. It will also stop platforms from favoring their own services over rivals’ or using third-party businesses’ data against them to squash competition.
Thursday is the deadline for designated gatekeepers to appeal the European Commission’s decision. Google and Microsoft have decided not to appeal, Reuters reported.
A spokesperson for the European Commission told Ars that the Commission has taken note of the appeals, respects companies’ right to appeal, and will defend its decisions in court.
“Our designation decisions are publicly available,” the spokesperson told Ars, and “they set out a solid reasoning for the designations.”
“In parallel, we will continue our work with all gatekeepers towards effective implementation of the DMA by March,” the Commission’s spokesperson said.
This story was updated on Nov. 17, 2023, to note Apple’s appeal.
