Report from the Reuters
In Brief – The European General Court has handed Meta and TikTok a limited victory in their challenge against the supervisory fee developed by the European Commission to fund enforcement of the Digital Services Act (DSA). The DSA, which regulates how digital platforms deal with illegal and objectionable content, sets up the European Commission as the regulator of the largest platforms, called VLOPs. The legislation established a VLOP supervisory fee of up to .05% of a platform’s annual worldwide net income to fund the compliance regime. As part of DSA implementation, the Commission determined the size of the annual fee would be based on the number of average monthly active users for each company and the profit posted in the preceding financial year. The General Court ruled that the European Commission failed to follow the appropriate procedures in determining the fee’s methodology, saying it said should have been set out by the Commission in a delegated act that was approved by the European Parliament and Council. The Commission responded to the decision by noting that the court did not challenge the fee methodology, only the procedure, and that it had 12 months to adopt a delegated act. A Meta spokesperson reiterated the company’s frustration with the underlying methodology, saying, “Currently, companies that record a loss don’t have to pay, even if they have a large user base or represent a greater regulatory burden, leaving others to pay a larger and disproportionate amount of the total.”
Context – It costs money to regulate big digital platforms, whether they are profitable or not. Amazon, Snap, Pinterest, and X were reportedly not charged any fees in 2023 due to reporting no net profits, while Meta and Google paid almost three-quarters of the total 2023 fees. More striking than the fact that the DSA included a bank regulation-style supervisory fee was the fact that the EU’s Digital Markets Act did not include any funding source despite setting up permanent regulation of the largest “gatekeeper” platforms. The German Government has proposed creating a parallel DMA supervisory fee.