Shares in Meta Platforms (META) were lower today despite the U.S. tech giant winning a legal battle against the European Union and its Digital Services Act.
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Income Hit
Meta and ByteDance’s TikTok sued the European Commission after they were hit with a supervisory fee of 0.05% of their annual worldwide net income to cover the EU executive’s cost of monitoring their compliance with the act.
The size of the annual fee is tied to the number of average monthly active users for each company and whether each posts a profit or loss in the preceding financial year. Both Meta and TikTok, however, said the methodology was flawed, resulting in disproportionate fees.
Such legal and regulatory issues are a key risk for tech firms like Meta – see below:
The Luxembourg-based General Court today agreed with the companies, giving EU regulators 12 months to fix their methodology using a different legal act.
“That methodology… 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,” judges said.
They said regulators need not repay the 2023 fees paid by the companies for now, while they come up with a new legal basis for the methodology used to determine the size of the fee.
U.S. Pressure
The DSA, which entered into force in November 2022, requires very large online platforms to do more to tackle illegal and harmful content on their sites or risk fines as much as 6% of their annual global turnover.
Other companies required to pay the supervisory fee include Amazon (AMZN), Apple (AAPL), Booking.com (BKNG), Google (GOOGL), Microsoft (MSFT), Elon Musk’s X social media platform, Snapchat (SNAP) and Pinterest (PINS).
European regulators have increasingly cracked down on major U.S. tech firms in recent times. This is down to concerns over the dominance of these companies and their technologies in European life, and what that means for the growth of European tech firms.
More recently, it has taken on a political dimension given the tariff trade battle between the EU and the U.S. under President Trump.
Is META a Good Stock to Buy Now?
On TipRanks, META has a Strong Buy consensus based on 42 Buy and 6 Hold ratings. Its highest price target is $1,086. META stock’s consensus price target is $873.14, implying a 14.03% upside.
