By Foo Yun Chee

LUXEMBOURG (Reuters) -Meta Platforms and TikTok said a European Union supervisory fee levied on them was disproportionate and based on a flawed methodology as they took their fight with tech regulators to Europe's second highest court on Wednesday.

Under the Digital Services Act that became law in 2022, the two companies and 16 others are subject to a supervisory fee amounting 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 based on the number of average monthly active users for each company and whether the company posts a profit or loss in the preceding financial year.

Meta told judges at the General Court it was not trying to avoid paying its fair share of the fee, but it questioned how the Commission had calculated the levy, saying 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 the company still did not know how the fee was calculated.

He said 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".

ByteDance-owned Chinese online social media platform TikTok was equally critical.

"What has happened here is anything but fair or proportionate. The fee has used inaccurate figures and discriminatory methods," TikTok lawyer Bill Batchelor told the court.

"It inflates TikTok's fees, requires it to pay, not just for itself, but for other platforms and disregards the excessive fee cap," he said.

He accused the Commission of double counting the companies' users, saying this was discriminatory because users switching between their mobile phones and laptops would then be counted twice.

He also said regulators had exceeded their legal power by setting the fee cap at the level of group profits.

Commission lawyer Lorna Armati rejected both companies' arguments and defended the Commission's use of group profit as a reference value to calculate the supervisory fee.

"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 said.

The Court is expected to issue its ruling next year.

The cases are T-55/24 Meta Platforms Ireland v Commission and T-58/24 TikTok Technology v Commission.

(Reporting by Foo Yun Chee; editing by Barbara Lewis)