The Digital Markets Act (DMA) is a landmark piece of legislation that regulates the conduct of gatekeeper platforms, that is, platforms which (a) offer a “core platform service” (CPS), and (b) act as gateways for businesses to reach end users. The DMA started to apply in May 2023. Since then, an interesting line of case law has started to emerge that raises fascinating questions about both general aspects of EU law (e.g., the principle of proportionality) and aspects specific to the digital economy (e.g., the conditions under which a platform qualifies as a social network or a video-sharing platform).
The DMA is implemented in two stages, namely designation and compliance. These stages can briefly be described as follows:
- A company may qualify as a gatekeeper if at least one of the CPSs it offers meets the criteria set in Article 3(1) and (2). In such cases, the company concerned must notify the Commission, which subsequently adopts a designation decision.
- Following designation, a gatekeeper has six months to comply with (most of) the obligations and prohibitions the DMA establishes. The measures a gatekeeper takes to comply with the DMA are set out in a report, a summary of which is made publicly available.
In September 2023, the DMA adopted the first wave of designation decisions. In March 2024, the relevant compliance reports were published. Soon thereafter, the Commission launched non-compliance proceedings against certain gatekeepers in relation to a wide range of issues, including data combination, anti-steering, and self-preferencing in ranking. These proceedings will be completed by March 2025.
It is too soon to analyse the Commission’s approach to the practices being investigated in the context of the ongoing non-compliance proceedings. However, we can certainly discuss in detail issues that have arisen from the administrative practice concerning designations. Such issues, which include CPS delineation, CPS qualification, and the conditions under which a platform that meets the designation criteria is not a gatekeeper, have been discussed at length (see e.g., here for an excellent overview of these issues).
But there is one matter regarding designation that has not received much attention to date, namely whether the CPS under consideration is a business-to-consumer (B2C) service (note that the DMA only applies to services that act as gateways for businesses to reach end users – see Article 3(1)(b)). Whether a CPS is a B2C service has been a major bone of contention in the designations of ByteDance (for TikTok) and Meta (for Facebook Marketplace). Both companies filed an action for annulment against the relevant Commission decisions. The GCEU has ruled on ByteDance’s application whereas Meta’s application is still pending.
This post explores the practice that is being developed in this area. Though the analysis focuses on the arguments raised by ByteDance and Meta in the context of their DMA designations, the issues that have arisen in determining whether a CPS is a B2C service illustrate the interplay between the DMA, the platform-to-business (P2B) Regulation, and consumer protection regulation. The relevant decisions also set out why natural persons, such as content creators and influencers, may qualify as business users. Aside from the obvious (which is that natural persons that act in a professional or commercial capacity must be taken into account when gatekeepers self-assess whether they meet the 10,000 business user threshold), the qualification of natural persons as business users means that they too may benefit from the obligations and prohibitions the DMA imposes on gatekeepers (e.g., access to audience data, right to promote offers to acquired end users).
Meta’s Facebook Marketplace
Meta has requested the Court to annul the Commission’s designation decision insofar as it finds that Facebook Marketplace is an online intermediation service that acts as an important gateway for businesses to reach end users.
In the context of the exchanges preceding its designation, Meta made the following submissions:
- While Meta previously allowed businesses to list certain products in some jurisdictions, Facebook business users do not have the ability to create any listings on Marketplace from their Facebook business Page since 30 January 2023 (when Meta removed this functionality). According to Meta, viewing Marketplace as a business-to-consumer (B2C) service would be manifestly flawed and would effectively mean that any C2C marketplace would likely satisfy the definition of ‘online intermediation services’ (see Meta DMA Designation Decision, paragraph 239).
- End users may legitimately generate a high number of listings within a category in the same month for genuine non-commercial reasons (242).
- Meta is taking action to limit the number of listings that an end user can make in a given category in a calendar month on Marketplace (241).
- The definition of ‘online intermediation services’ is clearly intended to apply to those services which provide an important gateway for business users as part of the ‘normal and legitimate use of such services’ (240).
- Marketplace does not provide any business-focused tools to facilitate the initiation of direct transactions between business users and end users in the Union (243).
- Marketplace is not provided to business users based on a contractual relationship, since (a) Facebook business Pages cannot post listings on Marketplace, and (b) business users are not allowed to list goods on Marketplace (244).
- Marketplace does not ‘individually’ comprise an ‘important gateway’, because users do not use it separately from any online social networking service CPS to which Facebook belongs (245).
The Commission rejected the above arguments. Its starting point was that, for the purposes of designation under Article 3, the Commission must consider information from the last three financial years (i.e., 2020, 2021 and 2022). The Commission found that, during 2020, 2021 and 2022, business users could list their products or services on Marketplace via their Facebook business Page. The Commission further noted that, during those same years, business users could also list products and services to end users on Marketplace through their personal Facebook profile. This option is currently still available to businesses, as advertised by Meta itself (256-260).
Moreover, although there is no official identification of business users by Meta, a high frequency or number of listings of the same kind may indicate that a user is acting in a professional or commercial capacity (to the effect that the user in question should be considered a business user). Based on data provided by Meta, such users made up the majority of Marketplace (258).
The Commission’s findings are arguably uncontroversial given the wording of Article 3(2)(c), and the case law in the realm of consumer protection regulation. More particularly:
- Article 3(2)(c) unequivocally establishes that an undertaking qualifies as a gatekeeper if the CPS it provides has exceeded the user thresholds established in Article 3(2)(b) in the last three financial years. This was the case with Facebook Marketplace. That a gatekeeper introduces changes in that CPS at a later stage should have no bearing on whether it qualifies as a gatekeeper. Put simply, the law is clear on the point concerning the changes Meta introduced in 2023.
- In addition to considering ‘pure’ business users (by taking account of the number of Facebook business Pages authorised to list offers on Marketplace), the Commission factors into its analysis business users that may be natural persons. EU Courts have had the opportunity to rule on the conditions under which an individual selling on platforms qualifies as a ‘trader’ for the purposes of consumer protection regulation, holding that a high frequency or number of listings of the same kind may indicate that such an individual is a ‘trader’ (see e.g., here). According to the Commission, that Meta is in the process of implementing limitations on the number or frequency of listings (e.g., 20 listings of furniture or 5 listings of properties for sale or rent per month) does not preclude that those users may qualify as business users; determining whether this is the case depends on the factual circumstances. This is aligned with the aforementioned case law, which establishes a series of parameters that must be considered when making such assessments, including whether a seller has a legal status that enables her to engage in commercial transactions, and whether the seller is subject to VAT.
The Commission also rejected Meta’s arguments related to whether Facebook Marketplace qualifies as an ‘online intermediation service’ for the following reasons:
- Whether an online platform offers specific tools for businesses to offer their goods and services for sale to end users is not part of the definition of online intermediation services, which is laid down in the P2B Regulation. Indeed, pursuant to that definition, an online intermediation service (a) is an information society service; (b) allows business users to offer goods or services to consumers, with a view to facilitating the initiating of direct transactions between those business users and consumers, irrespective of where those transactions are ultimately concluded; and (c) is provided to business users on the basis of contractual relationships between the provider of those services and business users which offer goods or services to consumers (see P2B Regulation, Article 2(2)). That Marketplace does not provide any business-focused tools to facilitate the initiation of direct transactions between business users and end users in the Union is not decisive for the assessment of whether a specific service constitutes an online intermediation service. Arguably, if this was a determining element, the P2B Regulation would have made express provision.
- The Commission also rejected Meta’s argument that Facebook Marketplace does not qualify as an online intermediation service because it does not have a contractual relationship with business users. The Commission noted that business users subscribe to Meta’s Terms and Conditions and Commerce Policies (with which sellers listing products on Meta’s platforms must comply) (264). Indeed, to the extent that the latter govern the use of Meta’s services, including its Marketplace, Meta’s argument does not seem to hold water. Relatedly, the P2B Regulation, which establishes the criteria under which a service is an online intermediation service (note that this is the definition on which the DMA relies), makes it clear that it governs ‘pre-formulated terms and conditions’ that have been ‘unilaterally determined’ by the online intermediation service provider. Meta’s terms and policies meet these criteria.
- In addition, the Commission found that, contrary to what Meta claims, the term ‘allow’ in the definition of online intermediation services (the service ‘allows business users to offer goods or services to consumers’) does not mean that business users should be allowed to list goods ‘as part of the normal and legitimate use of the service’ (266). That term should be understood in a functional sense (meaning that business users must be ‘enabled in practice’ to list goods via the service). According to the Commission, it is irrelevant whether Meta explicitly permits business users to list offers on Marketplace in its terms and conditions, so long as business users are ‘enabled in practice’ to list offers on Marketplace. In this regard, the fact that Meta indicated to business users that they could still create listings from their personal profile demonstrates that business users are ‘enabled in practice’ to list on Marketplace. The Commission arguably followed a sensible approach to this matter; if it were to adopt a narrow interpretation of the term ‘allow’, as suggested by Meta, this would significantly undermine the DMA because it would enable gatekeepers to escape designation by employing technical or contractual means that have little or no practical implications for how the service intermediates between businesses and consumers.
Meta’s action for annulment is still pending before the GCEU. However, based on the preceding analysis, the Commission’s decision appears to be well-reasoned and stands a good chance of being upheld.
ByteDance’s TikTok
The Commission’s decision to designate ByteDance entailed an assessment of how ByteDance assessed the number of business users within the EU. In order to assess whether it meets the threshold of 10,000 yearly active business users, ByteDance primarily relied on a new system allowing self-identified business accounts to register with TikTok as ‘registered business accounts’ (ByteDance Designation Decision, 76-77). The Commission found that ByteDance’s methodology was not appropriate for the reasons set out below.
First, because the registration feature was only recently introduced in a small number of Member States, the figures were deemed unrepresentative of TikTok’s actual business user base across the EU during 2020, 2021, and 2022. Moreover, according to the Commission, it is likely that many business users active in Member States where the feature is available may not have used it yet. Furthermore, the Commission noted that the absence of the registration feature in several Member States had probably resulted in under-counting active business users. Additionally, the voluntary nature of the registration feature meant that many business users might not have bothered to register (84-86).
Interestingly, the Commission further noted that ByteDance’s methodology excluded content creators acting professionally as business users who had not registered (86). This argument is supported by the DMA’s definition of a business user, which includes natural persons acting in a commercial or professional capacity (see Art 2(21)), and the (similar) concept of ‘trader’ under the UCPD (on which the DMA was presumably based). A trader is defined in the UCPD as ‘any natural or legal person who […] is acting for purposes relating to his trade, business, craft or profession and anyone acting in the name or on behalf of the trader’ (see Article 2(b)).
Against this backdrop, the Commission underlines the fact that business activities on TikTok may also be carried out by natural persons, including social media influencers, to the extent the latter use the platform for the purpose of providing goods or services to end users. The Commission’s Guidance on the interpretation and application of the UCPD states that an influencer would qualify as a trader or as a person acting in the name of or on behalf of a trader because influencers use their ‘greater than average’ reach on a platform to frequently promote specific brands or products (see UCPD Guidance, Section 4.2.6). TikTok hosts a large number of influencers on its platform and ‘Business for TikTok’ advises companies to work with influencers to boost their audience and sales.
The GCEU upheld the Commission’s decision, ruling inter alia that:
- It was necessary to take account not only of paid advertisers but also of non-advertising business users, given that those businesses could rely on TikTok to gain visibility for their activities (269).
- Several features of TikTok were specifically developed for and focused on the needs of business users that are not necessarily paid advertisers, such as content discovery and sharing across multiple devices and in particular via chats, posts, videos and recommendations, with a view to enabling them to grow their businesses and drive sales with business-friendly features (270).
- The figures concerning the engagement of ‘registered business users’ with TikTok concern only a small proportion of all business users, with the result that those figures are not sufficiently representative for the purposes of determining whether TikTok is an important gateway (273). The Court sided with the Commission, ruling that the possibility of registering as a ‘registered business user’ had only been introduced in 2022 and in a limited number of Member States, and that such registration was not mandatory (275). The Court further upheld the Commission’s methodology, which relied not on the number of ‘registered business users’, but on a different criterion, namely the number of self-identified business accounts in the Union. This methodology was not contested by TikTok and, given that the number of self-identified business accounts exceeded the relevant DMA threshold, the Court ruled that TikTok had not provided figures that were sufficiently representative of the number of business users it has.
Conclusions
A company can be designated as a gatekeeper under the DMA only if it provides a service that acts as a gateway for businesses to reach end users. In principle, this seems uncontroversial. However, as the designations of ByteDance and Meta illustrate, there are cases where concluding that a CPS is a B2C service may not be a straightforward exercise for the Commission. One thing that became clear from these two decisions is that the definition of “business users” under the DMA has not been (and is unlikely to be) subject to a narrow interpretation. Given how digital markets have evolved, including novel marketing and sales techniques that are used to attract eyeballs and revenues, this is arguably the right way forward. Regulators should not turn a blind eye to these developments, for the law (especially sector-specific regulation that applies to markets that move at a fast pace) should reflect supply and consumption patterns.
The Commission’s assessment of whether content creators (or influencers) act as traders for the purposes of the DMA should be seen alongside other initiatives that seek to address the legal aspects of this phenomenon (e.g., the AdlC’s inquiry into competition between online video content creators in the context of which it has been assessing the relationship between content creators, creator agencies and video content sharing platforms). In a DMA context, from a practical perspective, that content creators qualify as business users means that they benefit from the obligations and prohibitions the DMA establishes.
Moreover, the ByteDance and Meta cases have implications for other companies which have adopted a hybrid model (whereby both natural and legal persons may sell products and services on their platforms), such as e-commerce marketplaces for short-term stays or second-hand products; the interpretation of the term “business users” in the ByteDance and Meta cases leaves little room for gatekeepers to argue that natural persons acting as traders should not be factored into the calculations of the gatekeeper’s (business) user base.