The Trump administration is engaged in an ongoing legal battle against the makers of two Chinese smartphone applications, TikTok and WeChat, over their data-collection and content moderation practices. The administration has used both the International Emergency Economic Powers Act (IEEPA) and the Committee on Foreign Investment in the United States (CFIUS) in an attempt to force the companies to cease U.S. operations and, in TikTok's case, to change ownership. The administration's actions have spurred multiple legal challenges, several of which are ongoing, and for now, both TikTok and WeChat remain in operation in the United States.
The Trump administration has framed the TikTok and WeChat actions as the latest developments in the U.S. government's push to limit China's access to the sensitive data of U.S. persons.Footnote 1 The Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) expanded CFIUS's mandate to cover certain investments involving “sensitive personal data of U.S. citizens that may be exploited in a manner that threatens national security,”Footnote 2 and CFIUS has increasingly scrutinized Chinese entries into the U.S. software market.Footnote 3 For example, in March 2019, CFIUS pushed Beijing Kunlun Tech Co. Ltd. to unwind its purchase of Grindr, a gay dating app, based on fears that personal information could be used to monitor and blackmail U.S. military and intelligence personnel.Footnote 4 In July 2020, FBI Director Christopher Wray accused China of responsibility for a number of significant U.S. data breaches in the past decade, including the compromises of Anthem, Equifax, and the U.S. government's Office of Personnel Management.Footnote 5 Wray warned, “If you are an American adult, it is more likely than not that China has stolen your personal data.”Footnote 6
The Trump administration's actions against TikTok and WeChat have proceeded along two parallel tracks—one using the executive's authorities under IEEPA to impede both apps’ U.S. operations and the other using CFIUS to compel changes in the ownership of TikTok.
On August 6, President Donald Trump issued two executive orders pursuant to IEEPA, addressing the U.S. operations of both WeChat and TikTok.Footnote 7 The WeChat order stated that the app, a messaging and social media platform that is widely used in China and among the Chinese diaspora around the world, “automatically captures vast swaths” of its users’ data, which “threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information.”Footnote 8 The order also pointed to risks that WeChat could be censored by the Chinese Communist Party or used as a tool in Chinese disinformation campaigns.Footnote 9 The order promised “aggressive action against the owner of WeChat to protect [U.S.] national security.”Footnote 10
While the TikTok order leveled many of the same allegations of political censorship and risk for disinformation as the WeChat order, it added a more specific allegation regarding TikTok's collection of sensitive data:
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 . . . potentially allowing China to track the locations of Federal employees and contractors, build dossiers of personal information for blackmail, and conduct corporate espionage.Footnote 11
Both the TikTok and WeChat orders were initially set to take effect on September 20, 2020.Footnote 12
Utilizing the authorities laid out in the August 6 executive orders, U.S. Commerce Secretary Wilbur Ross announced restrictions on TikTok and WeChat's operations on September 18.Footnote 13 The Commerce Department regulations contained two separate sets of restrictions. The first group, scheduled to take effect on September 20, involved an app store ban, which would prevent existing users from updating their apps and new users from downloading the apps.Footnote 14 The second, broader set of restrictions would effectively block the apps from operating in the United States by banning their access to the internet hosting and content delivery services they require to function and restricting the use of the apps on U.S. software platforms.Footnote 15 The effective dates of this second group were bifurcated, with the restrictions on WeChat scheduled to take effect on September 20 and the TikTok restrictions delayed until November 12 to allow the CFIUS process a chance to resolve the national security concerns raised by TikTok.Footnote 16
A group of WeChat users filed suit in the Northern District of California, seeking to enjoin all aspects of the Commerce Department's order on WeChat on statutory and constitutional grounds.Footnote 17 The complaint called the order “a stark violation of the First Amendment,” arguing it “regulates constitutionally protected speech, expression, and association and is not narrowly tailored to restrict only that speech which presents national security risks to the United States.”Footnote 18 The plaintiffs also challenged the order on First Amendment free-exercise-of-religion and Fifth Amendment due process grounds and alleged that it exceeded the president's authority under IEEPA.Footnote 19
U.S. Magistrate Judge Laurel Beeler granted the plaintiffs’ emergency motion for a preliminary injunction on September 19, enjoining the WeChat ban on First Amendment grounds.Footnote 20 After reviewing the effects a total ban would have on WeChat's U.S.-based users, who “rely on the WeChat platforms to communicate, socialize, and engage in business, charitable, religious, medical-related, and political activities with family, friends, and colleagues (here in the U.S. and around the world),”Footnote 21 the court addressed the government's interest in promoting national security:
[T]he threats that the government has identified generally are significant. But while the general evidence about the threat to national security related to China (regarding technology and mobile technology) is considerable, the specific evidence about WeChat is modest.Footnote 22
As a result, the court held, “the regulation—which eliminates a channel of communication without any apparent substitutes—burdens substantially more speech than is necessary to further the government's significant interest.”Footnote 23 The Ninth Circuit declined to stay the injunctionFootnote 24 and scheduled oral argument for January 2021 on the government's appeal of the preliminary injunction.Footnote 25
On the same day that Judge Beeler granted the preliminary injunction against the WeChat ban, Commerce Secretary Ross released an order delaying the ban of TikTok from mobile app stores until September 27.Footnote 26 In the week leading up to the new effective date, federal district courts entertained emergency motions from two separate groups of plaintiffs challenging the TikTok bans.
In TikTok v. Trump, filed in the U.S. District Court for the District of Columbia, TikTok's parent company, ByteDance, challenged all of the prohibitions listed in the Commerce Department order, alleging that they represented “a gross misappropriation of IEEPA authority.”Footnote 27 ByteDance argued:
Past presidents have used this power responsibly to protect the country from genuine threats from abroad. . . . President Trump, however, used IEEPA against TikTok Inc., a U.S. company—headquartered in Los Angeles with hundreds of employees across the United States—to destroy an online community where millions of Americans have come together to express themselves, share video content, and make connections with each other. Footnote 28
Judge Carl Nichols granted ByteDance's request for a preliminary injunction against the mobile app store ban on September 27, the day it was scheduled to go into effect.Footnote 29 He ruled that the company was likely to succeed on its claim that TikTok falls under two separate exceptions to the president's IEEPA authority, which, respectively, ban the government from regulating transactions involving “information or informational materials” and “personal communication[s], which do[] not involve a transfer of anything of value.”Footnote 30 On December 7, Judge Nichols granted an additional preliminary injunction against the remaining portions of the Commerce Department order, holding that TikTok is likely to succeed on its claims that the order exceeds the president's authority under IEEPA and violates the Administrative Procedure Act (APA).Footnote 31 On the APA claim, Judge Nichols concluded that the plaintiffs “are likely to succeed on their claim that the Secretary” acted arbitrarily and capriciously “by preventing a company from operating in the United States on national security grounds without adequately considering whether those national security concerns could be fully resolved through a parallel divestment process.”Footnote 32 The government has appealed both preliminary injunctions.Footnote 33
In Marland v. Trump, filed in the Eastern District of Pennsylvania, a group of TikTok content creators challenged the Commerce Department bans on a variety of constitutional and statutory grounds, arguing that the bans use “a sledgehammer, not a scalpel,” to address the potential risks posed by TikTok.Footnote 34 After denying plaintiffs’ motion for a temporary restraining order against the app store ban,Footnote 35 U.S. District Judge Wendy Beetlestone issued a preliminary injunction against the broader TikTok ban on October 30.Footnote 36 She held that the plaintiffs were likely to prevail on their claim that the ban represented an ultra vires use of President Trump's powers under IEEPA.Footnote 37 Her opinion examined the text and history of IEEPA's informational materials exception,Footnote 38 concluding that Congress “created an ‘IEEPA-free zone,’ excluding . . . the indirect regulation of informational materials from the President's otherwise broad emergency powers.”Footnote 39 She determined that an injunction would be consistent with Congress's strong focus on “protect[ing] the public interest embodied in IEEPA's informational materials exception: ‘the robust interchange of information.’”Footnote 40 On November 12, the government appealed,Footnote 41 but the Commerce Department also published a notice in the Federal Register announcing its intent to comply with the preliminary injunction “pending further legal developments.”Footnote 42
Meanwhile, negotiations over TikTok's ownership have continued via the CFIUS process and could potentially moot the Commerce Department bans on TikTok.Footnote 43 The exact timeline of CFIUS's review of TikTok is unclear,Footnote 44 but news outlets have reported that it began as early as November 2019,Footnote 45 after several U.S. senators requested that the Trump administration investigate the company over its data-collection practices and alleged incidents of political censorship.Footnote 46 U.S. Treasury Secretary Steven Mnuchin revealed on July 29 that CFIUS was investigating TikTok,Footnote 47 and in a July 31 exchange with reporters, President Trump obliquely threatened to take executive action against the company.Footnote 48
The CFIUS review culminated in an executive order signed on August 14, 2020, in which President Trump ordered the unwinding of TikTok parent ByteDance's 2017 acquisition of Musical.ly,Footnote 49 a video-sharing application that provided much of TikTok's early base of U.S. users when the two platforms formally merged in 2018.Footnote 50 Relying on the president's powers under Section 721 of the Defense Production Act of 1950, the order set a ninety-day deadline for ByteDance to divest itself of all U.S.-based TikTok assets, including “any data obtained or derived from . . . users in the United States,” and it empowered CFIUS to review any proposed sale of TikTok to a U.S. buyer.Footnote 51
The U.S. government has been deeply involved in the negotiations over TikTok's future, closely scrutinizing sale discussions with major U.S. corporations.Footnote 52 Although Microsoft was a leader in early negotiations,Footnote 53 several other bidders emerged over the month of August,Footnote 54 including Oracle, a technology company with close ties to the Trump administration.Footnote 55 In September 2020, news outlets reported that ByteDance had selected Oracle as its “trusted technology partner” in the United States.Footnote 56 Under the proposed terms of the deal, U.S.-based ByteDance investors would gain effective control over TikTok, despite owning a minority of the company's shares, and control of TikTok's recommendation algorithm would remain in Chinese hands.Footnote 57 The proposed structure seeks to mitigate CFIUS's reported national security concerns while complying with Chinese export restrictions announced in August 2020 that empower the Chinese government to block exports of valuable technologies, including those “based on data analysis for personalized information recommendation services.”Footnote 58
The current status of the deal is unclear, and the Trump administration has given mixed signals about it. News outlets reported that the Treasury Department sought and received changes to the proposed deal, including revisions to the procedures for handling user data,Footnote 59 but White House Chief of Staff Mark Meadows criticized the proposed structure as a “repackaging” that would keep TikTok “as a predominantly Chinese-government run company,” and questioned whether it met the “national security . . . [and] American-interest thresholds” necessary to gain approval.Footnote 60 President Trump has offered conflicting messages. In remarks on September 19, he said that he had “given the deal [his] blessing,”Footnote 61 but he told reporters two days later that he would block the deal “[i]f we find that [Oracle] do[es]n't have total control.”Footnote 62 While ByteDance and Oracle have offered conflicting accounts of the deal, media outlets reported that it would leave roughly 80 percent of the new entity in ByteDance's hands until a planned stock offering in 2021.Footnote 63
Though negotiations between ByteDance and CFIUS over deal terms and proposed mitigation measures appear to have occurred throughout the fall, little had been made public until TikTok filed a petition in the D.C. Circuit on November 10, asking the court, which has original jurisdiction in CFIUS cases, to enjoin the CFIUS action and the related divestment order.Footnote 64 The filing alleges that ByteDance submitted a proposed mitigation plan to CFIUS on November 6, and affirms that ByteDance “intend[s] to file a motion to stay enforcement of the Divestment Order only if discussions reach an impasse and the government indicates an intent to take action to enforce the Order.”Footnote 65 Two days later, the plaintiffs filed a notice in the D.C. district court indicating that the government had granted a fifteen-day extension in the CFIUS review process.Footnote 66 The government granted a further extension to December 4, 2020.Footnote 67 Press reports indicate that although the government has declined to grant an additional extension, ByteDance and CFIUS continue to negotiate.Footnote 68
