How the U.S. Government Could Stop the Clock on TikTok

How the U.S. Government Could Stop the Clock on TikTok

Strained U.S.-China relations (driven by ongoing trade issues and accusations about the origin of the COVID-19 pandemic, among other things) have put TikTok at the center of political conversation in the United States. For nearly a month the president and members of his administration have ramped up rhetoric that the popular short-form video app should be banned because it poses a national security risk.

Earlier this month U.S. President Donald Trump, Secretary of State Mike Pompeo, White House Trade Advisor Peter Navarro, and other administration officials took aim at the popular app owned by Beijing, China-based ByteDance claiming everything from issues with how it handles user data to its ties to China’s communist government. 

Why are they targeting TikTok? Because it is owned by a Chinese company and it is very popular, making it an easy target in the current political environment. TikTok was the most downloaded non-gaming app in the world during the month of June, with more than 87M installs, according to data from SensorTower. This represented a 52.7% year-over-year increase. India (who banned the app earlier this month) and the U.S., represented 18.8% and 8.7%, respectively, in June. Also according to SensorTower, TikTok raked in $90.7M in user spending during the month.

How it Affects Esports and Gaming

As detailed in The Esports Observer’s Gaming Influencer Endorsements report released earlier this year, TikTok has seen an uptick of interest from esports organizations, stick-and-ball sports leagues and teams, and content creators.  

Esports organizations such as Team SoloMid, 100 Thieves, G2 Esports, Spacestation Gaming, Cloud9, FaZe Clan, Fnatic, and others have found respectable follower numbers on the platform. 

In the world of traditional sports, the National Hockey League, Major League Baseball, National Football League, and the National Basketball Association also have strong followings on the platform. 

Content creators such as Tyler “Ninja” Blevins, Imane “Pokimane” Anys, and many others have garnered millions of followers on TikTok, though earlier this month Blevins announced his departure from the platform via social media, citing privacy concerns.

By banning TikTok, the U.S. government will effectively deplatform content creators, who, particularly in the case of esports, are just starting to build large communities and figuring out how to properly monetize it.

Credit: TikTok

But beyond that, if the government bans TikTok it could open the door to look at other apps or companies that have deep ties to China. Imagine if the U.S. started taking aim at Tencent Holdings. What if games and apps owned or published by Tencent and operated in the U.S. could be banned because the company is accused of being “in compliance with the Chinese Communist Party?” What if the government began scrutinizing Tencent’s deep connections in the games industry? Tencent holds a fair percentage of Fortnite maker Epic Games; owns League of Legends and Valorant publisher Riot Games; and develops and/or publishes PUBG, PUBG MOBILE, Honor of Kings, and Call of Duty: Mobile. 

On the other end of this scenario, what if China begins applying restrictions to companies that are currently doing business in the country in retaliation? Companies such as Valve, Microsoft, Sony, Nintendo, Activision Blizzard, Electronic Arts, Take-Two Interactive, and others could become collateral damage and lose hundreds of millions or even billions of dollars as a result. 

Trouble in Paradise

While criticism of TikTok has increased over the last month because of the White House’s interest, ByteDance has faced criticism for years about what it does with data collected from U.S. consumers. In the wake of this latest round of accusations, the company continues to insist that the platform’s operation, employees, CEO (former Disney executive Kevin Mayer joined the company in May), and servers are located in the U.S. and Singapore, and that it does not share private user information with any governments including China’s.  

Security experts and researchers disagree; they have pointed out for a long time that the information TikTok gathers from its users is vast and that this data is making its way into the hands of the Chinese government.

Credit: TikTok

The administration is not alone in taking aim at TikTok. As COVID-19 continues to keep Americans home, TikTok continues to experience incredible growth, but has also earned unwanted and renewed attention from U.S. lawmakers and regulatory agencies. 

In early-2019 ByteDance agreed to pay a $5.7M USD fine, after the Federal Communications Commission determined that the company had violated the Children’s Online Privacy Protection Act (COPPA) when it collected the personal information of children under the age of 13.

In May of this year, 20 digital rights, privacy, religious, and children’s advocacy groups signed onto a letter asking the FCC (PDF) to once again look into TikTok’s handling of personal data related to users under the age of 13 to ensure that the company is still complying with COPPA.

Later that month, top Republicans on the House Energy and Commerce Committee sent a four-page letter to then-ByteDance CEO and founder Yiming Zhang about its current data protection protocols, if it was in compliance with the settlement it made with the FCC in 2019, and demanding an explanation of its relationship with the Chinese government. 

Credit: TikTok

More recently, U.S. Congressman Ken Buck (R-Colorado) detailed the “No TikTok on Government Devices Act” in an opinion piece published in Newsweek. It passed the House on Wednesday, with a similar bill making its way out of committee to be voted on by the full Senate very soon (it may have already passed by the time you read this). 

How the U.S. Government Can Kill TikTok

Some experts say that the president could use the International Emergency Economic Powers Act (PDF) in conjunction with an executive order to ban TikTok, but the current environment doesn’t fit the criteria put forth in the law.

Section A of § 1701 states (emphasis ours): “Any authority granted to the President by section 1702 of this title may be exercised to deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat.“ 

The problem lies in the fact that Section B has very specific criteria: “The authorities granted to the President by section 1702 of this title may only be exercised to deal with an unusual and extraordinary threat with respect to which a national emergency has been declared for purposes of this chapter and may not be exercised for any other purpose

Credit: TikTok

Perhaps further challenges will come from the Federal Trade Commission and the Federal Communications Commission, who have the power to investigate various aspects of ByteDance’s business, issue steep financial penalties, and force compliance with various federal laws.  

But the real threat for TikTok may come from the U.S. Treasury: In November of 2019 the Committee on Foreign Investment in the United States (CFIUS, a panel chaired by the U.S. Treasury Department) began a review of the 2017 $1B USD Musical.ly-ByteDance deal. ByteDance did not seek clearance for the acquisition with the CFIUS at the time; the panel checks foreign acquisitions of U.S. companies for potential national security risks. CFIUS has the power to unwind, modify, or force compliance of an acquisition if it determines that it creates a national security risk.

One of the easiest ways for TikTok to avoid calamity in the U.S. may already be underway, according to a report Thursday in The Information. A group of ByteDance’s U.S. investors led by General Atlantic and Sequoia are reportedly in preliminary talks with the company to buy a majority stake, and New York-based private equity firms and tech companies are also speaking with the company, according to sources who spoke with TI. Sources also say that these potential investors are speaking in tandem with the U.S. Treasury Dept. to see if a compromise can be worked out. Bloomberg claims that the company’s largest shareholder, Zhang Yiming, is “resisting” these efforts.


Note: Be sure to check back Monday for a conversation with Kurt Opsahl, deputy executive director and general counsel of the Electronic Frontier Foundation. In it, Opsahl talks about the legal ramifications of banning TikTok and some free speech issues that could come into play.

Published at Thu, 23 Jul 2020 21:14:47 +0000

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