TikTok Lite arrived in France and Spain -- the only EU countries where it is available -- in April this year. Users aged 18 and over can earn points to exchange for goods like vouchers or gift cards through the app's rewards programme.
"We have obtained the permanent withdrawal of TikTok Lite Rewards programme, which could have had very addictive consequences," the EU's internal market commissioner, Thierry Breton, said.
TikTok Lite is a smaller version of the popular TikTok app, taking up less memory in a smartphone and made to perform over slower internet connections.
TikTok made commitments to remove the programme from the 27-country bloc and not to launch "any other programme which would circumvent the withdrawal", the European Commission said in a statement.
It is the first major victory for the European Union's landmark Digital Services Act (DSA), a sweeping new law that requires digital firms operating in the bloc to effectively police online content to protect users from harm.
The commission kickstarted an investigation into the Lite app in April amid concerns over "addictive" effects, which forced TikTok to temporarily suspend the programme.
The case is now closed after TikTok, owned by Chinese company ByteDance, made the binding commitments.
Any breach of the promises could lead to heavy fines under the DSA.
"We will carefully monitor TikTok's compliance. Today's decision also sends a clear message to the entire social media industry," said commission executive vice president, Margrethe Vestager.
TikTok confirmed it had "now withdrawn" the rewards programme.
"We always seek to engage constructively with the European Commission and other regulators. TikTok is pleased to have reached an amicable resolution," a company spokesperson said.
- TikTok under pressure -
TikTok is still under investigation after a separate probe launched in February amid concerns TikTok may not be doing enough to address negative impacts on young people.
TikTok is among 25 "very large" online platforms, including Facebook, Instagram and YouTube, that must comply with the DSA's stricter rules since August 2023.
The rules also expect digital retailers to act effectively to protect shoppers online.
The DSA gives the EU the power to hit companies with fines as high as six percent of their global annual revenues.
Repeat offenders can see their platforms blocked in the EU.
There are also ongoing investigations into X, formerly Twitter; Chinese online retailer AliExpress; and Meta over its Facebook and Instagram platforms.
TikTok also faces a litany of problems across the Atlantic.
It has filed a lawsuit to stop a US law that forces the app to be sold next year or face a US ban, claiming it violates First Amendment rights of free speech.
The United States upped the pressure on TikTok with a lawsuit last week, accusing the app of violating children's privacy by collecting data about them without their parents' permission when they use the platform.
TikTok said it disagreed with the allegations and that the company had safeguards to ensure age-appropriate experiences.
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