The European Union’s attempt to make Big Tech pay for the costs of regulation has hit a roadblock after Meta Platforms and TikTok secured a legal victory against the bloc’s supervisory fee system. While the ruling does not immediately refund the contested payments, it forces regulators back to the drawing board, setting the stage for broader consequences across the technology industry. The decision not only reshapes the financial burden of compliance with Europe’s Digital Services Act (DSA) but also opens questions on how the EU will manage the balance between fair regulation and economic impact in the digital economy.

The legal challenge and its background

The supervisory fee at the heart of the dispute stems from the DSA, a landmark set of rules that came into force in late 2022. Designed to make very large online platforms and search engines more accountable, the law requires them to monitor and remove illegal or harmful content, protect minors, and ensure greater transparency in advertising and recommendation algorithms. To enforce these obligations, the European Commission introduced an annual levy to cover its oversight costs.

The fee was calculated at 0.05% of a company’s annual global net income, with adjustments based on user numbers and profitability. Meta and TikTok were among the companies hit by this methodology in 2023, arguing that the system was flawed. They claimed the formula unfairly penalized profitable firms while exempting loss-making competitors, even if those competitors had massive user bases and created significant regulatory challenges.

The Luxembourg-based General Court agreed with their arguments, ruling that the methodology had been adopted through the wrong legal procedure. According to the judgment, the Commission should have used a delegated act — a more formal and legally binding mechanism — rather than an implementing decision. Regulators now have twelve months to revise the fee structure.

This outcome does not absolve Meta or TikTok of paying fees altogether, but it does halt the current system and compels the EU to craft a more defensible legal framework. Importantly, the companies will not be refunded the 2023 fees already paid, highlighting that the court’s ruling is procedural rather than financial in nature.

Why the ruling matters for the industry

The judgment is likely to reverberate across the tech industry. The supervisory fee is not limited to Meta and TikTok but extends to nearly two dozen “Very Large Online Platforms” and search engines designated under the DSA. These include Amazon, Apple, Google, Microsoft, Booking.com, Snapchat, Pinterest, and Elon Musk’s X. For all these firms, the court’s decision signals that the EU’s cost-sharing formula for regulation may undergo significant change.

One immediate implication is that the Commission will have to revisit the principle of tying fees to profitability. Critics argue that such an approach creates distortions by sparing companies that may post accounting losses while still commanding vast user numbers and regulatory attention. Meta, for example, has long complained that the methodology unfairly left them bearing a disproportionate share of the total levy. The court’s endorsement of this concern means future fee structures could shift toward user base metrics rather than profitability.

Another consequence is the delay and uncertainty this ruling introduces. With regulators given a one-year timeline to reformulate the levy, there is a window in which compliance costs remain unsettled. This uncertainty complicates financial planning for major platforms, many of which already face mounting expenses from new rules on content moderation, transparency reports, and independent audits required under the DSA.

At a broader level, the ruling underscores the challenges the EU faces in enforcing its ambitious digital agenda. The DSA was touted as a global gold standard for platform regulation, but disputes over its financing mechanism reveal how even procedural missteps can slow momentum and give companies leverage to challenge aspects of the regime.

What comes next for the EU and digital regulation

For Brussels, the ruling represents both a setback and an opportunity. On one hand, it forces the European Commission to admit procedural errors and rebuild its fee system under stricter legal requirements. On the other, it offers a chance to design a fairer, more transparent methodology that can withstand legal scrutiny and win broader acceptance from industry stakeholders.

The recalibration of the supervisory fee will likely focus on three elements: ensuring consistency across companies regardless of profitability, better reflecting user base as a measure of regulatory burden, and creating clearer links between oversight costs and company contributions. Industry analysts expect the Commission to engage in closer consultations with both regulators and companies in drafting the delegated act.

Meanwhile, the court’s decision does not alter the central thrust of the DSA itself. Companies remain bound by obligations to moderate content, protect children, and safeguard democratic processes from manipulation. Non-compliance could still result in penalties of up to 6% of global turnover — a far greater threat than the supervisory fee. Yet, the financial debate matters because it reflects the broader tension between Europe’s regulatory ambitions and the costs of implementation.

The ruling also carries international implications. Other jurisdictions, including the United States, the United Kingdom, and parts of Asia, are closely watching how the EU enforces its digital regulations. The manner in which Brussels recalibrates the levy could influence whether similar cost-sharing mechanisms are adopted elsewhere. A transparent and equitable system may strengthen Europe’s claim as a regulatory leader, while further missteps could fuel industry criticism of overreach.

For Meta and TikTok, the ruling is a strategic win. Both companies have faced intense scrutiny in Europe — Meta over its handling of data privacy and content moderation, TikTok over concerns about data security and its ties to China. The court’s judgment signals that despite regulatory pressure, platforms retain avenues to push back against the EU and shape the contours of digital governance.

At the same time, industry insiders caution against reading the decision as a fundamental weakening of the EU’s stance. The DSA remains intact, and the Commission has already signaled that it considers the ruling a procedural fix rather than a substantive blow. With political momentum behind tougher digital regulation still strong, companies are unlikely to escape significant oversight or financial contribution in the long term.

(Adapted from MarketScreener.com)