President Trump signed an executive order prohibiting any U.S. company from doing business with TikTok if it’s not acquired by a U.S. company by Sep. 15. According to NPR, the President used the executive power given to him under the International Emergency Economic Powers Act, which gives him authority to impose economic sanctions based on “unusual and extraordinary threats” to national security. After the 45-day period, any company doing business with TikTok could result in a $300,000 fine and possible criminal prosecution.
A portion of the Executive Order on Addressing the Threat Posed by TikTok states:
TikTok automatically captures vast swaths of information from its users, including Internet and other network activity information such as location data and browsing and search histories. This data collection threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information — potentially allowing China to track the locations of Federal employees and contractors, build dossiers of personal information for blackmail, and conduct corporate espionage.
TikTok also reportedly censors content that the Chinese Communist Party deems politically sensitive, such as content concerning protests in Hong Kong and China’s treatment of Uyghurs and other Muslim minorities. This mobile application may also be used for disinformation campaigns that benefit the Chinese Communist Party, such as when TikTok videos spread debunked conspiracy theories about the origins of the 2019 Novel Coronavirus.
These risks are real. The Department of Homeland Security, Transportation Security Administration, and the United States Armed Forces have already banned the use of TikTok on Federal Government phones. The Government of India recently banned the use of TikTok and other Chinese mobile applications throughout the country; in a statement, India’s Ministry of Electronics and Information Technology asserted that they were “stealing and surreptitiously transmitting users’ data in an unauthorized manner to servers which have locations outside India.” American companies and organizations have begun banning TikTok on their devices. The United States must take aggressive action against the owners of TikTok to protect our national security.
Secretary of State Mike Pompeo said that TikTok and WeChat were “feeding data directly to the Chinese Communist Party.” This sentiment has gained bipartisan support as presidential candidate Joe Biden has also ordered his staff to delete TikTok from their work and personal phones. Similarly, the U.S. Senate has banned TikTok on all government devices.
In a letter to President Trump, 25 members of Congress wrote, “These popular apps’ data collection practices, coupled with China’s onerous cybersecurity laws requiring all companies operating in China, including TikTok’s parent company, Byte Dance, to share user data with Chinese Communist Party authorities, present a very real threat to U.S. national security.”
Non-governmental entities, such as Amazon and Wells Fargo, are also calling on employees to remove TikTok from their work devices.
We are shocked by the recent Executive Order, which was issued without any due process. For nearly a year, we have sought to engage with the US government in good faith to provide a constructive solution to the concerns that have been expressed. What we encountered instead was that the Administration paid no attention to facts, dictated terms of an agreement without going through standard legal processes, and tried to insert itself into negotiations between private businesses.
We made clear our intentions to work with the appropriate officials to devise a solution to benefit our users, creators, partners, employees, and the broader community in the United States. There has been, and continues to be, no due process or adherence to the law. The text of the decision makes it plain that there has been a reliance on unnamed “reports” with no citations, fears that the app “may be” used for misinformation campaigns with no substantiation of such fears, and concerns about the collection of data that is industry standard for thousands of mobile apps around the world. We have made clear that TikTok has never shared user data with the Chinese government, nor censored content at its request. In fact, we make our moderation guidelines and algorithm source code available in our Transparency Center, which is a level of accountability no peer company has committed to. We even expressed our willingness to pursue a full sale of the US business to an American company.
Twenty lawsuits have been filed against TikTok across the United States claiming that TikTok allegedly steals children’s data and sends it to China. According to NPR, TikTok’s legal team states that TikTok can transfer data to China without breaking any U.S. laws. The company claims to send data to Singapore, but not China, however according to the lawsuit, the plaintiff’s technology experts have studied TikTok’s data flow and found that information is being sent to servers in China “under the control of third-parties who cooperate with the Chinese government.” TikTok’s legal team refutes this and states “the lawsuit is based on a ‘factually mistaken’ analysis of how the app collects data and what it is doing with that data.”
According to NPR, TikTok may be planning to sue the Trump administration as early as Tuesday. It will probably be filed in U.S. District Court for the Southern District of California, where TikTok’s U.S. operations are based.
Blake Chandlee, vice president of TikTok’s Global Business Solutions, states that TikTok hires 1,500 people in the United States, intends to hire 10,000 more. It has been the most downloaded app in the Apple Store in both 2018 and 2019. There are 500 million TikTok users around the globe and 85 million active users in the United States. With success like this, it’s not surprising that Microsoft, Twitter, Netflix, Snap, Amazon.com and Google-parent Alphabet are all considered to be potential purchasers of the app.
Microsoft is a month into discussions to buy TikTok operations in the US, Australia, Canada and New Zealand. The company said it would make sure that all TikTok user data is stored in the United States and all data stored elsewhere would be deleted after it is moved to the United States.
Twitter is also being considered to be a potential buyer. It doesn’t currently appear to have enough funds to purchase TikTok, however some of its investors are looking for ways to help make the transaction happen. Twitter would probably have less regulatory scrutiny than Microsoft, however, historically Twitter appears to have had trouble breaking into the online video space.
Netflix is also in the hunt, however Netflix never made a major acquisition and its operations lack many synergies with TikTok. Netflix has recently identified TikTok as a competitor and according to CNBC, Netflix co-Chief Executive Officer Reed Hastings sees video games and self-made short-form videos as a threat to the company. Thus, purchasing TikTok would help Netflix hedge against viewership losses in these areas. In addition, purchasing TikTok could help Netflix maintain its “No Ads” policy while earning advertising revenues through TikTok.
The U.S. government also issued a ban on the Chinese conglomerate Tencent Holdings. Tencent Holdings is the world’s largest video game publisher by revenue. According to the Georgia Straight, the order declares that beginning in 45 days, any transaction with Tencent Holdings or any of its subsidiaries will be prohibited. The entertainment industry is looking to see what effect banning Tencent’s WeChat will have on Tencent’s investments in other U.S. companies such as Snap, Activision Blizzard, Ubisoft, Riot Games and Epic Games, the owners of Fortnite.