The Digital Markets Act (DMA) is a revolutionary tool to regulate EU digital markets, it complements competition law by imposing ex ante obligations on the largest digital undertakings. The General Court judgement in the ByteDance case was the first test of the limits of this expediated enforcement and resulted in a remarkable win for the Commission. The Court dismissed ByteDance’s appeal against the European Commission’s decision to designate ByteDance with its social network TikTok as gatekeeper under the DMA. Whether or not a digital platform is considered a gatekeeper is the decisive switch in the DMA framework. Gatekeepers are subject to much stricter scrutiny. The reasoning of the Court shows that the burden of proof is reversed: once the Commission proves that the presumptions the DMA establishes for gatekeeper designations apply, the gatekeeper must submit sufficient evidence to “manifestly call into question” these presumptions. This limitation to the rights of defence in the form of reversed burden of proof and high evidentiary standards is justified as it applies to only a select group consisting of the largest and most powerful undertakings: gatekeepers.

DMA Background

Until the arrival of the DMA, competition in digital markets was largely regulated through competition law. Competition law requires the Commission to engage in complex analyses to define markets, establish anti-competitive effects, and to engage with efficiency justifications raised by the investigated firm. The ex ante obligations in the DMA help to expediate enforcement, as these obligations apply towards any designated gatekeeper, allowing the Commission to bypass the lengthy and resource intensive evidentiary burdens associated with competition law by relying on presumptions.

In competition law, at least in antitrust, the starting point for an investigation is a possible infringement of the cartel prohibition or the prohibition of abusing one’s dominance. The Commission must then prove that the infringement has taken place in a punitive procedure of quasi-criminal nature. In this procedure, defendants are granted a high level of protection of their rights to a fair trial.

The DMA works differently, as it relies on a system of formalized “designations”. Undertakings that provide or operate certain core platform services (as defined in Art. 2(2) DMA) and which have reached a certain size (as defined in Art. 3 DMA) are designated as gatekeepers. To do so, the Commission relies on presumptive, quantitative thresholds set out in Art. 3(2) DMA based on user numbers, turnover and market capitalization Firms that are designated as gatekeepers under the DMA must adhere to all the substantive obligations laid down in Art. 5, 6, 7, 13, 14 and 15 DMA. The Commission does not need to prove that the firm has behaved anti-competitively, nor is designation as gatekeeper punitive in nature. An investigation into a possible infringement of the law only starts when the firm is considered non-compliant with the DMA obligations, which may result in fines or periodic penalty payments.

The judgement in bird’s eye view

In the case we discuss here, ByteDance challenged the Commission’s assessment that ByteDance can be considered a “gatekeeper” under the DMA for its sizeable TikTok platform. Being designated as gatekeeper triggers the application of a number of obligations in the DMA, which aim to create contestable and fair markets in the digital sector. However, ByteDance’s pleas related to their gatekeeper status were dismissed by the General Court. The Court ruled that ByteDance failed to meet the standards of proof required to “manifestly call into question” the presumptions of the quantitative thresholds. We discuss how the Court came to their ruling, and what it means to manifestly call into question, hereunder.

ByteDance’s appeal related to its gatekeeper designation under Art. 3 DMA. The Commission found that ByteDance’s TikTok platform met the quantitative thresholds under Art. 3(2) DMA. According to the Commission, TikTok has more than 45 million end-users and more than 10.000 business users, a market capitalization of over €75 billion and an annual turnover in the EEA of over €7.5 billion and has met these conditions for three years. Once these quantitative thresholds are met, there is a presumption that the gatekeeper meets the three conditions required for designation laid down in Art. 3(1) DMA: it has a significant impact on the internal market, operates an important gateway for business users to reach end users, and is entrenched (i.e. has been in this position for a significant amount of time). The Commission found the fact that TikTok had achieved these numbers is sufficient to designate TikTok with gatekeeper status.

ByteDance disagreed and tried to raise a number of qualitative arguments to rebut the presumptions. First, ByteDance tried to put forward that it did not meet the quantitative thresholds as TikTok had less than 10.000 business users and generated less than €7.5 billion in the EEA. Instead, most of its users and generated revenue came from China. Here, ByteDance (almost) had a small victory. The Court ruled that while the location of the users does not matter, it does matter where revenue is generated. Thus, the Commission had erred in law, but that this was ultimately inconsequential as the alternative threshold for market capitalization was met. The Court’s interpretation of the thresholds as alternatives, rather than having to prove them cumulatively, minimizes burdens on the Commission. And – more interestingly – the Court showed that it will not overturn the Commission’s decision on the basis of technical or procedural errors that do not affect the outcome of the decision.

Moving on, even if the quantitative thresholds were considered met, ByteDance tried to rebut the presumptions created by the quantitative thresholds through qualitative arguments as permitted under Art. 3(5) DMA. In essence, ByteDance presented four arguments.

First, ByteDance claimed that it did not have a significant impact on the internal market. Byte Dance argued that the TikTok platform did not meet the quantitative thresholds and the relative scale of its activities in the EU is small.

Second, ByteDance considers TikTok not to be an important gateway. ByteDance claimed that it does not operate a so-called platform ecosystem and is trying to compete with much larger and more established incumbents such as Meta and Alphabet. Consequently, it should be considered a challenger and not a gatekeeper.

Third, according to ByteDance, TikTok is not entrenched. Rather TikTok is, according to its parent company, subject to significant competitive challenges by the much larger incumbents from one side and ambitious market entrants from the other. ByteDance argued its lack of entrenchment would be proven by its user engagement: Users are not locked-in on TikTok and multi-home on different social networks (i.e. use different social networks in parallel), and business users are not reliant on TikTok for advertising strategies.

Fourth, ByteDance also tried to argue that its rights to defence and equal treatment were infringed, as it felt that the Commission had applied a different reasoning for other gatekeepers and had not given ByteDance the chance to bring forward some of its pleas during the gatekeeper designation process.

The Court dismissed all of these pleas – mostly on the basis that ByteDance did not sufficiently prove that these arguments could manifestly call into question the presumptions of the quantitative thresholds. This would however be the applicable threshold for the Court to overturn the Commission’s designation decisions. ByteDance did not prove the absence of a platform ecosystem, and even if it did, it did not prove that there were disadvantages to not having an ecosystem. The Court noted TikTok’s meteoric rise to explain that ByteDance seemingly did not need an ecosystem to be designated as gatekeeper. The Court dismissed ByteDance’s arguments on multi-homing as they had not provided proof on the intensity of multi-homing, but only on the numbers of parallel use of social networks. It dismissed ByteDance’s pleas on its relative scale to the total market and its competitors as it did not submit evidence related to these statements during the Commission proceeding. Furthermore, the Court followed the Commission’s reasoning to find that nothing precluded ByteDance from being both a gatekeeper and a challenger.

Key takeaways from the judgement

In essence, the judgement shows the Court’s willingness to confirm the formalized route to gatekeeper designations taken under the DMA, heavily relying on quantitative thresholds, to achieve swift enforcement and market results on digital platform markets.

As long as the quantitative thresholds are met, this is largely sufficient for the Commission to designate gatekeepers. It does not have to provide elaborate statements or make complex analysis to support their findings or to counter qualitative arguments brought forward by the gatekeeper. For the gatekeeper on the other hand, the bar to challenge the findings of the Commission or rebut the relevance of the quantitative presumptions is set incredibly high. They must manifestly call into question the findings of the Commission by providing sufficient evidence not only to raise doubts but also to create a counterfactual. Moreover, it is insufficient to prove that the Commission has erred in law or made technical errors with respect to some parts of the judgement – unless there are indications that the error in law would or could have led to a different outcome.

The high evidentiary burdens and limitations to the gatekeeper’s rights of defence are justifiable for a number of reasons: First, designation decisions are not punitive, but rather administrative. As such, there is more leeway in the scope of protection of the defendants’ rights than there is in quasi-criminal proceedings. Second, effective enforcement of EU law vis-à-vis large digital platforms demands a pragmatic approach to evidentiary burdens – the DMA was created to overcome the shortcomings of competition law in this regard. Third, the scope of the DMA is limited to the most powerful undertakings, namely digital gatekeepers. These firms have the resources and expertise necessary to collect counter-evidence and to challenge Commission decisions in great detail. As such, setting a higher bar for these undertakings is justified as they have access to equal or greater resources than the Commission in litigating decisions under the DMA. Irrespective of which implicit justification has led to the decision of the Court, the ByteDance-judgement has made it clear that gatekeepers that want to challenge the DMA presumptions will have to back up their claims. The General Court has sent a signal to gatekeepers: if you want to bring a case, prove it, or lose it.