TikTok Gets Reprieve on Trump’s Demand for a Ban on the App
The Trump administration pulled back from its threat to ban the viral video-sharing app TikTok in the U.S.
(Bloomberg) -- The Trump administration pulled back from its threat to ban the viral video-sharing app TikTok in the U.S., as the dispute winds its way through the court system and a proposed sale hangs in limbo.
For months, the app’s Chinese owner, ByteDance Ltd., has faced the prospect of a U.S. ban starting Thursday. But judges have blocked those prohibitions from going into effect. The Commerce Department said on Thursday that it would comply with those court rulings for the time being, even as the government appeals.
The TikTok prohibition “HAS BEEN ENJOINED, and WILL NOT GO INTO EFFECT, pending further legal developments,” the Commerce Department said in a document published in the federal register.
Separately, ByteDance has challenged an order from the Treasury Department to sell TikTok or face unspecified penalties. The U.S. Court of Appeals in Washington on Thursday gave ByteDance and the Trump administration Dec. 14 and Dec. 28 deadlines to file documents in the case.
When it filed the petition Tuesday, TikTok said the government had not responded to its latest efforts to strike a compromise and prevent an enforced sale. It’s not clear if anything has developed since to extend the deadline, but the court order didn’t allude to any new arrangement.
ByteDance had sought U.S. approval for a deal to sell a stake in the app to Oracle Corp. and Walmart Inc. before the Nov. 12 deadline. But the agreement appears to be in limbo. Before filing its petition in Washington this week, ByteDance requested a 30-day extension from the Committee on Foreign Investment in the U.S., or Cfius, that is overseen by the Treasury Department, to keep working toward a solution. That request went unanswered, according to court papers.
As of midnight Thursday, the administration hadn’t issued a statement about whether it was granting the extension.
Lawyers for TikTok and officials at the Treasury Department didn’t respond to requests for comment.
President Donald Trump has made the battle over TikTok a central front in his broader efforts to crack down on the influence of China’s technology industry in the U.S. Trump first ordered a TikTok sale in August, and threatened to ban the app if ByteDance couldn’t reach an agreement with an American company.
He hasn’t said anything about TikTok since last week’s presidential election, having focused on trying to discredit the results that show he lost. But on Thursday he issued an executive order prohibiting U.S. investments in Chinese firms determined to be owned or controlled by the country’s military.
In September, a judge in Washington blocked a portion of the ban that would have prevented new downloads of the app. And on Oct. 30, a Pennsylvania judge issued a temporary injunction on rules that would have prevented third-party companies from providing online infrastructure that allows TikTok to function smoothly. The U.S. appealed the Washington ruling in October, and said on Thursday it would appeal the Pennsylvania ruling.
In a filing late Thursday, the Justice Department urged the appeals court in Washington to throw out the injunction blocking the ban on new downloads, saying, at minimum, it’s overly broad.
“The district court failed to defer to the national security determinations of the Executive Branch, and failed to consider the harms that the court’s injunction inflicts on the public,” the government said in the filing.
Oral arguments in the case are scheduled for Dec. 14.
The status of the Cfius process for a sale is less clear. If the government reaches an accord with the company, it could exercise discretion around enforcement timing, said Aimen Mir, a partner at Freshfields Bruckhaus Deringer and a former deputy assistant secretary for investment security at the Treasury, where he ran reviews for Cfius.
“Usually when there is extended silence from Cfius, it suggests there’s no clear consensus within government on what the next step would be, but this has been an atypical case for awhile,” Mir said.
If an extension hasn’t already been granted, Mir said the Justice Department would have to go to court and seek enforcement of the divestiture order. Trump’s executive order from August doesn’t stipulate a clear punishment for failure to divest, but says that “the Attorney General is authorized to take any steps necessary to enforce this order.” The Justice Department declined to comment.
TikTok is one of the most popular apps in the world -- with more than 100 million U.S. users -- and ByteDance’s most important service outside of China. The company and its investors are desperate to finish a deal to avoid a ban in what has been a valuable market for other social media apps, like Facebook Inc.’s Instagram and Snap Inc.’s Snapchat.
Trump threatened to ban TikTok and order its sale to a U.S. company as a result of national security concerns. The U.S. is worried that the Chinese government could use the app to gain access to the personal data of American citizens.
Cfius, the Treasury Department panel that reviews foreign acquisitions of American businesses, said in a July 30 letter included in ByteDance’s court filing in Washington this week that its security concerns were based on both classified and unclassified information. The letter cited the move by a Chinese affiliate of ByteDance in 2017 to establish a Communist Party Committee in its governance structure, and pointed out that ByteDance also collaborates with public security bureaus across China.
©2020 Bloomberg L.P.