EU Rulings Affirm Large Platform Designations Under Digital Services Act, Digital Markets Act

Last week, the Court of Justice for the European Union (CJEU) issued a pair of press releases conveying important clarifications to large platform designations under a pair of major legislative packages regulating e-commerce within the EU: the Digital Services Act (DSA) and the Digital Markets Act (DMA). In one ruling by the EU’s General Court, and another opinion issued by an Advocate General of the CJEU, large platform designations creating obligations under either of those acts have been upheld for both major social media platform TikTok and Stripchat, an online adult entertainment platform operated across the EU. The rulings generally affirm the EU Commission’s methodologies for such determinations without triggering requirements under at least the DMA to conduct market investigations in response to legal challenges from designated platforms.

Stripchat VLOP Designation Affirmed Despite Actual User Numbers Under Threshold

The DSA became effective in the EU in February 2024, creating a series of requirements for websites classified as either very large online platforms (VLOPs) or very large online search engines (VLOSEs). Excepting small enterprises and microenterprises, defined as online platform providers having fewer than 50 employees or 10 employees, respectively, the DSA requires online platform providers to publish user numbers every six months. Platforms or search engines averaging more than 45 million users per month may be designated by the EU Commission as a VLOP or VLOSE, which creates responsibilities under the DSA including establishing a point of contact for authorities, assess illegal content or violations of fundamental rights committed using their services, and establish internal compliance procedures to mitigate those risks.

At the first compliance deadline for publishing user numbers in February 2023, Cyprus-based Technius Ltd. reported that its online adult entertainment platform Stripchat had an average monthly number of active recipients (AMAR) of 31.8 million based on data provided by marketing analytics service SimilarWeb. However, the EU Commission determined that SimilarWeb’s reduction of visit numbers due to bounced visits – visits where users enter a website and leave without viewing any content – underreported actual AMAR numbers, which averaged more than 62 million.

Technius appealed the EU Commission’s VLOP designation to the EU’s General Court, challenging the reliability of the Commission’s data and alleging infringement of the principle of legal certainty. Noting that the EU Commission also sourced its data from SimilarWeb, which already filters significant numbers of bounced visits from its unique visitor datum, the General Court found that the Commission was entitled to rely on its methodology in reaching an AMAR surpassing the DSA’s VLOP threshold.

Following the EU Commission’s VLOP designation, SimilarWeb adjusted its methodology resulting in a corrected AMAR of 37.3 million for the contested period. Although this falls under the AMAR threshold for VLOP designation, the General Court found that this did not call into question the legality of the Commission’s decision, which must be assessed in light of the facts as they stood at the decision’s adoption based on the data provided by Technius. The General Court also held that the principle of legal certainty did not require that the methodology for determining AMAR be prescribed by law because the DSA contains sufficient guidance regarding “active recipients” to enable online platform providers to calculate their AMAR.

AG Biondi: TikTok Still an Important Gateway Despite Use of Other Social Networks

Entering into force in 2022, the Digital Markets Act (DMA) creates a series of different obligations for large digital platforms designated as gatekeepers for having a significant impact on the EU’s internal market, providing a core platform service that is an important gateway for businesses reaching end users, and enjoying or foreseeably enjoying an entrenched and durable position. Under the DMA, these elements are presumed for companies earning €7.5 billion each year for three years or valued at a market capitalization of at least €75 billion, its core platform service has 45 million monthly active end users and 10,000 yearly active business users within the EU, and where the active user thresholds were met in each of the previous three years.

In September 2023, the EU Commission announced its first designation of six companies as gatekeepers under the DMA, including ByteDance, the Chinese tech company operating the social media platform TikTok. The Commission issued this ruling without opening a market investigation after ByteDance argued that the DMA’s presumptions shouldn’t apply despite meeting the relevant thresholds. After the General Court dismissed ByteDance’s challenge to the Commission’s ruling, ByteDance appealed to the Court of Justice, which invited Advocate General (AG) Andrea Biondi to examine the issues presented in the case.

Noting that the EU Commission is required to open a market investigation when arguments are presented that manifestly call the presumption into question, AG Biondi noted that those arguments need only be sufficiently convincing and not conclusive proof. However, the General Court did not err in rejecting ByteDance’s arguments that the absence of a wider ecosystem, users’ use of several competing services and TikTok’s scale relative to other platforms precluded TikTok from qualifying as an important gateway. “In particular, the fact that users also use other social networks does not, in itself, show that TikTok is not an important gateway,” AG Biondi’s opinion reads.