| Science and Technology Law Review

2020 was a rollercoaster year for everyone and the explosively popular app “TikTok” was no exception. Entering 2020 on a high note, the success of Bytedance, Tiktok’s parent company, began in earnest with the purchase of Musical.ly[1] for about $1 billion in 2017. The acquisition, when combined with Bytedance’s nascent TikTok app,[2] found astonishing success in the U.S. market and, by mid-2019, TikTok was the most downloaded app[3] on Apple’s App Store for five straight quarters. By year’s end, TikTok had 46 million downloads in the U.S. alone[4] with average users spending almost forty minutes per day on the app. With 60% of users in the U.S. between the ages of 16-24, TikTok dominated the youth market,[5]and positioned Bytedance as the only Chinese social media company to gain such prominence in Western markets.[6]

The Threat

As TikTok won over Western teens, there was growing concern among U.S. and other Western policymakers. Along with Tiktok’s violations of child privacy laws,[7] its Chinese ownership raised national security concerns, rooted in the Chinese Communist Party’s (CCP) control over private companies. Bytedance itself fell victim to coercion when the CCP shut down its flagship news aggregator, “Toutiao” for straying from “core socialist values.”[8] The CCP forced Bytedance’s CEO to issue a humiliating self-criticism,[9] acknowledging his failure to exclude content “incommensurate with socialist core values” and not “realis[ing] that socialist core values are the prerequisite to technology.” In addition to hiring 4,000 additional employees to promote CCP propaganda, Bytedance was to ensure “correct political direction” when designing its algorithms. Numerous reports have since emerged of censorship by TikTok at the Party’s behest: banning American Muslim-rights activists[10] from criticizing China’s genocide against Uighurs; censoring references to Xinjiang, Tibet, Tiananmen Square, Falun Gong, protests in Hong Kong, with some even extending beyond China’s borders; and sanitizing politically sensitive topics unrelated to China—like #blacklivesmatter and LGBTQ issues.[11] The CCP’s success in these coercive measures signals to U.S. and Western policymakers that TikTok is well-placed for CCP influence operations, akin to the Russian disinformation campaign in 2016.[12]

The U.S. government is also concerned with the vast quantities of data TikTok collects on American users. In 2017 China implemented a National Security law which obligates tech companies to “support, assist, and cooperate with” CCP intelligence.[13] Thus, the CCP can potentially collect sensitive national security information from users who work for the U.S. government,[14]and gather data profiles, including personal information, of tens of millions of Americans to use for intelligence espionage, AI, and even blackmail.[15] In recognition of the myriad threats posed by TikTok, many figures in the U.S. began sounding the alarm. In late 2019, Senators Chuck Schumer and Tom Cotton jointly asked the Trump Administration to investigate TikTok and parent company Bytedance;[16] the Navy, Army, TSA, and other government agencies outright banned soldiers and employees from using Tiktok; and, in March 2020, a group of Republican Senators introduced a bill to ban the use of TikTok on federal government devices.[17]

U.S. government response

In November 2019, amid growing pressure from Senators,[18] the Committee on Foreign Investment in the United States (CFIUS) began investigating TikTok. CFIUS, designed to prevent predatory foreign investment in the U.S. that threatens national security, is an interagency committee headed by the Treasury Department empowered to bar certain foreign investments and order divestment of foreign interest in U.S. companies or vis-versa. In 2018, Congress passed the Foreign Investment Risk Review Modernization Act (FIRRMA), which directed CFIUS to focus on transactions involving “critical infrastructure…, critical technologies…” or companies which “maintain[] or collect[] sensitive personal data of United States citizens that may be exploited in a manner that threatens national security”[19] (Bytedances’ purchase of Musical.ly fits this third category). Prior to this investigation, for example, CFIUS had ordered another Chinese technology firm, Kunlun, to divest from U.S. dating app Grindr. Here, CFIUS claimed jurisdiction in the matter because Bytedances’ acquisition of Musical.ly, a U.S. firm, sparked TikTok’s success.[20]

On August 6, 2020, while CFIUS was investigating TikTok, President Trump issued an Executive Order,[21] under the sweeping national security authority of the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) (IEEPA). IEEPA gives the President extraordinary discretion to sanction certain foreign entities by banning all “transactions” with them, after certifying a “national emergency.”[22] Citing the above national security threats and the national emergency declaration in Executive Order 13873 of May 15, 2019 (Securing the Information and Communications Technology and Services Supply Chain), President Trump issued another Executive Order banning all “transactions” by U.S. persons with Bytedance or its subsidiaries after 45 days.[23] The exact scope of the ban was unclear as the Order specifies that the Commerce Secretary shall determine which “transactions” will be banned, but it would effectively operate as a ban if Apple and Google could no longer feature TikTok in their app stores.[24] The Order also functionally banned the use of “WeChat” in the U.S., a Chinese messaging app used primarily by Chinese nationals.

As TikTok reeled from the IEEPA Order, President Trump issued a CFIUS Order on August 14 which retroactively prohibited Bytedance from owning TikTok based on the Musical.ly purchase.[25] The order gave Bytedance 90 days to divest its ownership of TikTok and TikTok’s data with the opportunity to extend by 30 days at the discretion of CFIUS. On the commercial front, Microsoft (in partnership with Walmart)[26] and Oracle opened negotiations to purchase TikTok in an attempt to capitalize on a wildly popular social media app with the added effect of eliminating the national security issues posed by Chinese ownership of the firm.

The Aftermath

The twin Executive Orders soon faced impediments as President Trump’s subsequent actions worked to weaken the government’s asserted national security justifications. Soon after the Order, he professed a desire for the U.S. government to take “a cut” of any sale of TikTok,[27] hinting that his interests were more economic than previously thought. Despite initial indications that Microsoft would be selected, in September the Treasury Department chose Oracle as the “trusted technology partner” to purchase TikTok.[28] The choice raised additional questions, given its CEO’s close ties to the Trump Administration.[29]

In late August, 2020, China responded by modifying its export laws to prevent the sale of Tiktok. Chinese state newspapers joined the disdain, blasting the deal as “extortion.”[30] Nonetheless, on September 18, the Commerce Department issued regulations requiring a ban on TikTok’s distribution through Apple and Google’s app stores and, on September 20, banned the internet hosting of TikTok after November 12.[31]

In an odd twist, the Trump Administration delayed the divestiture deadline while TikTok worked to challenge the Orders in court. Then, on September 18, two days before the initial Order’s forty-five day deadline, TikTok sought a preliminary injunction in the D.C. District Court.[32] In their complaint, TikTok alleged First Amendment free speech and Fifth Amendment due process violations. They further alleged the Commerce Department’s Order violated the Administrative Procedures Act for being “arbitrary and capricious” and exceeded the Agency’s statutory authority under IEEPA. On the same day, a group of TikTok creators sued under similar grounds in the Eastern District of Pennsylvania.[33] The Commerce Department then extended the deadline until September 27 to give Oracle and TikTok additional time to set sales terms.[34] While the Pennsylvania District Court denied the claims brought by the group of creators, the D.C. District Court granted TikTok a preliminary injunction just before the September 27 deadline, halting the firms ban or sale.[35] With the Apple and Google app store bans enjoined, the TikTok creators re-filed for a preliminary injunction, this time against the November 12 ban on internet hosting. Judge Beetlestone granted the injunction, finding that the plaintiffs “were likely to succeed" in their argument that the Commerce Department’s action was ultra vires.[36]

After the presidential election, however, in another demonstration that the President’s own concerns over national security may have been pretextual, the Trump Administration seemed to lose interest in the case. On November 10, Bytedance requested a delay from CFIUS and never heard back.[37] At the last minute, on November 12, CFIUS granted a fifteen day extension, then extended yet again until December 4.[38] Bloomberg reported the deadline was effectively postponed indefinitely as talks continued between TikTok and the U.S. government.[39] Finally, on December 7, the D.C. District Court issued a preliminary injunction against the internet hosting ban on grounds that “the Secretary’s failure to adequately consider an obvious and reasonable alternative before banning TikTok renders the Secretary’s action arbitrary and capricious.”[40] Thus, the TikTok orders are in limbo as the Biden Administration prepares to take office on January 20.

What’s next?

The Biden campaign banned employees from using the app in July, even on their personal phones, and Biden referred to TikTok as a “genuine concern.”[41] With Biden’s repeated emphasis on working with allies to counter China, the U.S. may seek to coordinate with like-minded countries and focus on more targeted, evidenced-based actions than the Trump Administration.[42] India has already banned TikTok (although, this may be punishment for a boarder dispute, rather than a national security concern); the UK and France are investigating TikTok; EU officials have expressed concerns; the Canadian Parliament has suggested it would consider a ban if direct evidence emerged of data misuse; and Japan is also considering a ban.[43]

2020 was quite the year for Tiktok and with international pressure mounting, 2021 doesn’t look like will it be a cakewalk, either.

Footnotes

[1] https://techcrunch.com/2017/11/09/chinas-toutiao-is-buying-musical-ly-in-a-deal-worth-800m-1b/.

[2] https://techcrunch.com/2018/08/02/musically-tiktok/.

[3] https://sensortower.com/blog/top-apps-worldwide-q1-2019-downloads.

[4] https://www.businessofapps.com/data/tik-tok-statistics/.

[5] https://www.reuters.com/article/us-tiktok-cfius-exclusive/exclusive-u-s-opens-national-security-investigation-into-tiktok-sources-idUSKBN1XB4IL.

[6] https://itif.org/publications/2020/11/23/chinese-competitiveness-international-digital-economy.

[7] https://www.ftc.gov/news-events/press-releases/2019/02/video-social-networking-app-musically-agrees-settle-ftc.

[8] https://s3-ap-southeast-2.amazonaws.com/ad-aspi/2020-09/TikTok%20and%20WeChat.pdf?7BNJWaoHImPVE_6KKcBP1JRD5fRnAVTZ=.

[9] https://s3-ap-southeast-2.amazonaws.com/ad-aspi/2020-09/TikTok%20and%20WeChat.pdf?7BNJWaoHImPVE_6KKcBP1JRD5fRnAVTZ=.

[10] https://www.theverge.com/2019/11/28/20986867/tiktok-unblock-us-teen-china-criticism-muslim-minority-terrorist-imagery-moderation-guidelines#:~:text=TikTok%20has%20reversed%20a%20ban,the%20New%20York%20Times%20reports..