TikTok’s Countermeasures against U.S. Political and Regulatory Crackdown

Editor’s Notes：

Introduction

Provided that Chew attended the hearing as the TikTok CEO, it will be a precedent for the highest level of a Chinese-funded company to confront lawmakers directly in the US Congress, which has a specific benchmarking significance. The hearing will not only help to publicly respond to the accusations made by American politicians that TikTok and its parent company threaten the security of the US but also help to alleviate the so-called “Chinese companies like TikTok violating the rights and interests of American consumers” as alleged by China hawks in the US. It also provides a useful reference for Chinese companies to respond to the future US-style political environment and compliance requirements.

This analysis focuses on the US President executive orders against TikTok and the latter’s countermeasures. By probing into the TikTok case, we extrapolate the external political and legal risks, as well as the policy and compliance solutions Chinese companies may adopt in the new era of globalisation.

Executive Orders against TikTok Signed by Trump

As early as January 2019, the American think tank Peterson Institute for International Economics (PIIE) released a report entitled “The Growing Popularity of Chinese Social Media Outside China Poses New Risks in the West”, claiming that TikTok, which is popular in Europe and the United States, has brought “Huawei-sized national security risks” to the West. It will be a “fatal mistake”, if Western governments do not promptly intervene in the expansion of TikTok in the European and American markets.

On August 6, 2020, the then U.S. President Trump, who was campaigning for re-election, officially issued Presidential Executive Order No. 13942 (“the Order” thereafter), explicitly targeting TikTok by invoking acts like the International Emergency Economic Powers Act (IEEPA) and the National Emergencies Act.

Executive Order 13942

(Source: US Federal Register)

The primary purpose of the Order, as its lengthy title indicates, is to “address the threat posed by TikTok and take additional steps to address the national emergency concerning the information and communications technology and services supply chain.”

The Order declares that the spread of mobile applications developed and owned by Chinese companies in the United States has seriously threatened America’s national security, foreign policy, and economic interests. In particular, TikTok, owned by Beijing-based ByteDance, has more than 175 million downloads in the United States and more than 1 billion downloads worldwide, posing a “significant and immediate threat” to the national security of the United States.

The Order goes, “As a video-sharing mobile application, TikTok automatically captures a large amount of information about its users, including Internet and other network activity information, such as location, browsing and search history, etc.” The Order speculates, “TikTok’s data collection activities in the United States may cause risks, allowing the Chinese government to obtain sensitive identity and property information of American users.” In particular, the Order alleges that the TikTok app is “potentially allowing” the Chinese government tracking and recording the location of U.S. federal internal government employees and external contractors so as to “build dossiers of personal information for blackmail” or “conduct corporate espionage.”

Accordingly, it is imperative for the U.S. government to take “aggressive action” against TikTok’s parent company ByteDance, to address the threat posed by this mobile application to the United States. Specifically, Article 1 of the Order clearly states that any person or entity under the jurisdiction of US law shall not communicate or initiate any transaction with China ByteDance and its subsidiaries, including TikTok. The prohibition begins 45-days from the date of the Order. The Order requires the U.S. Department of Commerce to formulate specific implementation rules and, 45 days later, provide a list specifying the transactions that should be prohibited under this Order.

Less than a week after the promulgation of the Order, the Trump administration intensified its efforts by issuing another order on August 14, 2020, declaring that ByteDance’s acquisition of Musical.ly in 2017 “may take threatening measures to endanger America’s national security”. Therefore, ByteDance must, within 90 days, carry out divestment of the previously acquired Musical.ly., resell the relevant business and assets to a US subject approved by CFIUS, and destroy the necessary US user data information and carry out the third-party compliance audits.

One month later, on September 18, in accordance with the requirements of Executive Order No. 13942, the U.S. Department of Commerce officially announced a list of transactions that should be prohibited, which in fact banned TikTok’s operations in the United States. Specific transactions prohibited by the Ministry of Commerce are as follows.

1. From September 20, 2020, the distribution or maintenance of TikTok applications, component codes or application updates through the AOL application store is prohibited.

2. From November 12, 2020, it is prohibited to provide any Internet hosting service, any content delivery network service, any Internet transit or peer-to-peer service in the United States to run or optimise TikTok; or prohibit the development and/or use TikTok’s codes, functions or services in the functions of the accessed software or services.

TikTok Took Lawsuits against the Orders

TikTok and its parent company ByteDance, once hired well-known political and business managers in the U.S., such as Kevin A. Mayer and Vanessa Pappas, with high salaries in response to the U.S. government’s political suppression and compliance requests. TikTok readjusted its business plans and internal compliance rules and tried to divest and sell some assets and businesses to American companies.

However, the Trump administration’s “aggressive action” directly forced TikTok to face the dilemma of either being sold with the approval by the CFIUS or being banned completely in the United States by the White House.

“There is hardly any political question in the United States that sooner or later does not turn into a judicial question.”
- Written by Tocqueville, Democracy in America

Finally, TikTok, its parent company, employees, users and other related stakeholders in the United States filed lawsuits in several lawcourts to challenge a series of regulations and orders imposed by the Trump administration in the United States through judicial branch!

TIKTOK INC. et al v. TRUMP et al

On August 24, 2022, TikTok and ByteDance directly challenged the executive order by filing a lawsuit against former President Trump, Secretary Wilbur Ross, and the U.S. Department of Commerce in the United States District Court, Central District of California.

In the complaint, and contesting the Trump administration’s contention under the executive order, the Plaintiffs alleged, among other things, that:
1. The global success of TikTok is due to the entrepreneurial innovation of private enterprise entities.
2. TikTok has implemented safeguards to help protect the privacy and security of U.S. user data.
3. TikTok and ByteDance have proactively engaged with the U.S. government and sought to address any conceivable national security concerns.
4. By banning TikTok with no notice or opportunity to be heard (whether before or after the fact), the executive order violates the due process protections of the Fifth Amendment.
5. The background and timing of the executive order plainly suggest that it was designed not for a bona fide national security reason but instead to further President’s Anti-China political campaign.
6. The independent expert’s opinion demonstrates that the Trump administration failed to provide evidence of actual threat nor did it provide justification for its punitive actions.

Under the complaint, the Plaintiffs seek a declaratory judgment that the August 6, 2020 executive order is “unconstitutional” and “ultra vires”, including violations of due process, violation of freedom of speech, restrictions on personal communication and transmission of information materials, etc. Therefore, the Plaintiffs seek a preliminary and permanent order enjoining the government from implementing and enforcing the Order.

In addition, in response to the list of prohibited transactions issued by the U.S. Department of Commerce on September 18, TikTok and its parent company ByteDance also filed a lawsuit in the Federal District Court of Columbia on the same day. TikTok and ByteDance requested the court to adjudicate the U.S. Department of Commerce’s ban and the “unlawful” and “unconstitutional” Presidential Decree No. 13942, which should be invalid and shall not be enforced.