While EU regulatory charges continue to hit hard for all the major social apps, both Meta and TikTok have had a rare win this week, with an EU court siding with their argument that the European Commission’s “supervisory fee” is not a fair charge for each app.
Back in 2022, as part of the initial documentation for the EU Digital Services Act (DSA), which applies to all large tech platforms operating in the region, the EU Commission noted that it would look to also charge an annual “supervisory fee” to these platforms in order to help finance their own enforcement. The more revenue a platform makes, the higher the cost that they have to contribute in this respect, with platforms charged 0.05% of their annual worldwide net income to cover the EU executive's cost.
The justification here is that it’s going take EU regulators a lot of labor time to ensure compliance with the DSA, and that cost, in its view at least, should be tied into the regulatory approach, ensuring that the platforms themselves pay their fair share in enforcement.
The problem is that because the cost is based on revenue, the system presents a flawed logic, in that those with more users, and thus, more workload, don’t necessarily have to contribute a higher amount. So while the platform with the most users would theoretically require the most labor time in this respect, the relative charges are not based around the correct metric. For example, if a company records a financial loss, it doesn’t have to pay at all, even if it has the most users.
As such, Meta and TikTok challenged the supervisory fee, and a Luxembourg-based General Court has now sided with their argument.
As per the court’s summary:
“In order to determine the amount of the supervisory fee payable for 2023, the Commission calculated the number of average monthly active recipients of the services concerned on the basis of a common methodology based on data provided by third-party operators and annexed to each implementing decision. However, since that methodology is an essential and indispensable element of the determination of the supervisory fee, it should have been adopted not in the context of implementing decisions but in a delegated act, in accordance with the rules laid down in the DSA.”
So again, the argument here is that the process isn’t built around the correct metric, meaning that the costs are not relative to workload for supervisory purposes.
That means that the EU Commission has to come up with a new mechanism for calculating related costs, which it can then build into the DSA documentation.
So really, it’s a minor win in the broader scheme, as the Commission will now just come up with a more enforceable logic for such charges, but given that EU fines are costing social media platforms billions per year, any win is considered significant at this stage.
Meta, in particular, has been seeking help from the Trump Administration in this respect, as it looks to push back on various EU regulations, which it sees as unfairly targeted towards its business.
And the White House agrees, and has threatened retaliatory action against the EU Commission for fines that impact U.S. businesses. But it hasn’t actually implemented any of those actions as yet, though this is a big reason why Meta CEO Mark Zuckerberg has had such a significant change of heart on Trump.
Because again, Meta is paying a billion dollars in fines every year in Europe, based on overly complex, and ever-changing DSA rules.
And while this is a minor challenge, based on a legal technicality, it represents another step in social platforms looking to counter such rules.
