Europe’s second-highest court, the General Court, has upheld challenges by Meta Platforms and TikTok against a European Union supervisory fee imposed under the Digital Services Act (DSA) of 2022.

According to reports, the court ruled in favor of Meta and TikTok, citing the fee’s flawed and disproportionate calculation method.

The ruling is a potential win for TikTok and Meta

On Wednesday, Europe’s second-highest court upheld challenges by Meta Platforms and TikTok against a European Union supervisory fee imposed on them.

Under a Digital Services Act signed into law in 2022, Meta, TikTok and 16 other companies are subject to a supervisory fee which amounts to 0.05% of their annual worldwide net income aimed at covering the European Commission’s cost of monitoring their compliance with the law.

The size of the annual fee is calculated based on the number of average monthly active users for each company and is influenced by the company’s profit or loss margin in the preceding financial year.

TikTok and Meta’s arguments

Meta Platforms and TikTok shared their arguments concerning the subject in June, claiming the European Union supervisory fee levied on them was disproportionate and based on a flawed methodology.

Meta denied trying to avoid paying its fair share of the fee, and questioned how the Commission had calculated the levy, claiming it had been based on the revenue of the group rather than of the subsidiary.

Meta’s lawyer Assimakis Komninos told the panel of five judges that his client was still in the dark about how the fee was calculated. According to him, the provisions in the Digital Services Act, or DSA, “go against the letter and the spirit of the law, are totally untransparent with black boxes and have led to completely implausible and absurd results.”

Streaming platform TikTok shared similar sentiments. “What has happened here is anything but fair or proportionate. The fee has used inaccurate figures and discriminatory methods,” TikTok lawyer Bill Batchelor said.

“It inflates TikTok’s fees, requires it to pay, not just for itself, but for other platforms and disregards the excessive fee cap,” he added.

Batchelor even went as far as accusing the Commission of double-counting the companies’ users, saying this was discriminatory because it would mean users who switch between their mobile phones and laptops would be counted twice.

As far as he is concerned, the regulators have exceeded their legal power by setting the fee cap at the level of group profits.

Commission lawyer Lorna Armati has rejected the companies’ arguments and defended the Commission’s actions.

“When a group has consolidated accounts, it is the financial resources of the group as a whole that are available to that provider in order to bear the burden of the fee,” she told the court.

“The providers had sufficient information to understand why and how the Commission used the numbers that it did and there is no question of any breach of their right to be heard now, unequal treatment,” she added.

The Court is expected to issue its ruling next year.

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