EU charges TikTok over its "rabbit hole" feed, putting up to 6% of ByteDance revenue at risk

EU tech regulators charged TikTok on Friday with breaching the bloc's online content rules because of the "rabbit hole" effect of its recommender system, CNBC reported. The European Commission issued what it calls preliminary findings under the Digital Services Act, saying TikTok failed to put proportionate, reasonable and effective measures in place against the risks. Bloomberg and Investing.com carried the same story, which came from Reuters.

What the Commission says

According to CNBC, the Commission said endless, repeated exposure to content about sadness, isolation or body image can harm users' mental health. EU tech chief Henna Virkkunen put it this way: "Every time a user scrolls or likes a video on TikTok, the algorithm serves more of the same leading users down rabbit holes they cannot easily escape from."

The Commission wants TikTok to change the design of its "For You" feed, rely more on users' explicit preferences, make user controls easier to find and use, and test its algorithm regularly.

The money

These are charges, not a decision. If TikTok cannot resolve the issue, its Chinese owner ByteDance faces a fine next year of up to 6% of global annual turnover, CNBC said. The cap is a ceiling on revenue, not profit, which is why it is the number regulators and advertisers watch. We have not found a ByteDance revenue figure we can verify from a primary source, so we are not putting a dollar amount on the maximum.

It is also the second round. The Commission charged TikTok in February over addictive design, inadequate child protection and making it hard for researchers to request public data, CNBC reported. TikTok then called those findings "categorically false" and said it would challenge them. The Commission is separately investigating the same rabbit-hole effect on Meta's Facebook and Instagram.

Who it hits

The practical stake is for businesses that rely on TikTok's feed for customers: a restaurant, a salon, a retailer posting short video. A remedy that gives users' stated preferences more weight than watch-time would change what gets served, and that could shift reach for accounts built on a few viral formats. Nothing is ordered yet, and the Commission has not said what the final remedy would be, so there is nothing to change in an ad budget today.

The pressure is not only European. CNBC notes governments are imposing or considering bans for underage users. In the US, Google, Meta and TikTok are suing California over its under-16 feed law; see our report.

What to watch

TikTok's written reply and any commitments it offers, whether the Commission folds the February and November findings into one decision, and the outcome of the parallel Meta probe. Related: markets.

Sources: CNBC (Reuters reporting) on the Commission's preliminary findings; Bloomberg Technology and Investing.com headlines; Chronicle archive. Preliminary findings are not a final ruling. This is market information, not investment advice.