TikTok and its China-based parent company ByteDance filed suit against the Trump administration in response to the president signing an executive order banning U.S. companies from “transacting business” with TikTok effective September 20. A second EO would force ByteDance to sell TikTok to a U.S. owner.
TikTok’s lawsuit implies that Trump is seeking revenge on TikTok because a large number of TikTok users and K-pop fans requested hundreds of thousands of tickets to a Trump rally in Tulsa, with no intention of showing up. The resulting embarrassment to the Trump campaign and the president when attendance was lower than the “million plus tickets” number the campaign touted was palpable. Shortly after that, Trump campaign chief Brad Parscale was summarily demoted and replaced by Bill Stepien.
Trump’s legal basis for the ban order is the International Emergency Economic Powers Act, a sweeping law offering the president a smorgasbord of options to control international commerce to deal with “unusual or extraordinary threats.”
The sale order is under the authority of the Exon-Florio amendment to the Defense Production Act (the same law that Trump invoked to induce various companies to produce ventilators). The amendment gives the president authority to force a foreign company to divest U.S. assets when it harms national security. In 2017, ByteDance bought Musical.ly, a U.S. company, that it transformed into TikTok, therefore offering a nexus to claim “U.S. assets.” The law is intended more to prevent China from buying, say, Raytheon, than TikTok, but there’s no limiting application to military hardware, so viral video software can be claimed to harm national security if the president can successfully make that stick.
“The order is thus a gross misappropriation of IEEPA (International Emergency Economic Powers Act) authority and a pretext for furthering the President’s broader campaign of anti-China rhetoric in the run-up to the U.S. election,” the company said in its lawsuit.TikTok is suing the Trump administration, L.A. Times, August 25, 2020
TikTok claims that the EOs violate its constitutional rights. There may be something there, dealing with due process rights, but it’s unlikely the suit will succeed on the merits of the authorizing laws.
It’s not totally clear if Trump’s orders, and their tight deadlines, are constitutional, but they may be necessary all the same. On the surface, we’re looking at a Chinese company that has been banned in India (its largest user base) and repeatedly accused of harvesting personal data for the use of the Chinese government (CCP). Many of TikTok’s U.S. employees (who have also filed suit separately) work here under H-1B visas and could be forced to leave the country if the ban takes effect. There’s every reason to believe that China has a very close hold on TikTok, and despite the company’s assurances that data is stored in Virginia and does not leave the U.S., we all realize that China lies about such things as a routine matter.
On the other hand, TikTok is enormously popular with the younger generation, and is a very powerful e-commerce platform, and therefore rivals are salivating at the prospect of a ban.
Meanwhile, rival companies such as L.A.-based TrillerTriller , which operates a music video app, have gone on the offensive, poaching TikTok staff and some of its popular creators. For example, Raj Mishra, former head of strategy at ByteDance, has joined Triller as head of India operations.
The uncertainty is causing panic among some TikTok creators, who have urged fans to follow them on alternate video platforms including YouTube and Instagram. Several digital stars defected to and joined as investors. Instagram earlier this month launched its own short-form video feature, Reels, which TikTok CEO Kevin Mayer called a “copycat product.”
Should the president be able to, with a stroke of his pen, ban a commercial product on the basis of accusations? The lawsuit’s claim of personal vengeance may be its only chance at success.
U.C. Berkeley law professor Steven Davidoff Solomon (“the Deal Professor”) thinks the suit is a longshot, but is a necessary business pivot to buy more time to get a decent sale price from the market. Writes Solomon:
TikTok thus has precedents for a legal challenge — but it would merely delay the inevitable. It cannot challenge the substance of the divestiture order. And although Mr. Trump appears to stretch the legal boundaries of his emergency powers, courts are unlikely to interfere.
TikTok is in talks with Microsoft and Oracle, and was in talks with Google parent Alphabet, before that company dropped out, according to a Bloomberg report. In the end, TikTok will very likely be sold to an American company.
The bigger question is whether Trump’s orders will stand on their own, or will TikTok’s lawyers successfully convince a judge that this is nothing more than a vengeance play for Tulsa. No company should be made to pay for the actions of its users, especially if those users embarrassed the President of the United States.
Even if I believe that TikTok might be a national security threat (and I feel there’s plenty of evidence to support that, if you consider the “warfare domain” of social networking and Internet as a hostile environment with China as an active opponent), I’m pretty sure allowing the president to Thanos snap a company out of existence after he’s suffered embarrassment from its users is a bad idea.
Imagine, in a second term, what Trump (or a future Democrat in office) might do to other companies that embarrass him, if his motive was a thin-skinned reaction to a bunch of K-pop teens. Then again, we don’t know that’s his motive. I’d like to see the evidence before I decide. A friendly California federal judge will likely see things differently (and probably grant an injunction delaying the EOs), and the media will run with that.
I think it’s probably for the best that the EOs don’t go into effect, and that TikTok sells to Microsoft or Oracle or some other U.S. firm. It’s a good bet that this will be the final outcome, and we should all find something pleasing in that.