In August, President Donald Trump issued two executive orders targeting ByteDance Ltd, the parent company of TikTok Inc. [1] [2] The orders would force ByteDance to sell TikTok to a US company and destroy all data it collected on US users.
Almost immediately, a bidding war began between Oracle, Twitter, Microsoft, and Walmart. Meanwhile, ByteDance filed a lawsuit in California seeking to enjoin enforcement of the orders. [3] China prohibited the sale of ByteDance’s algorithms, setting up for a diplomatic kerfuffle. Yet, as of Saturday, September 19, everything appears to have been resolved.
What is TikTok?
TikTok is a social media platform for short, looped videos (up to 15 seconds). It launched in China in 2016, was purchased by ByteDance in 2017, and by late 2018 had almost 500 million monthly active users (“MAUs”), mostly in China. In late 2018, TikTok merged with Musical.ly, an analogous platform with 100 million MAUs, mostly US teenagers. This acquisition and many viral dance challenges have given the platform a strong hold over young Americans. Today, TikTok is the fastest growing app in the world, and the seventh most downloaded app of all time.
How did TikTok Get on Trump’s Radar?
When TikTok spiked in popularity in Q4 2019, the Committee on Foreign Investment in the United States (“CFIUS”) launched an investigation into the acquisition of Musical.ly. [4] Even though ByteDance is a Cayman Islands corporation, it retains close ties to the Chinese government because most of its users live in China. As a result, in August 2020, CFIUS concluded that TikTok’s access to data on US users posed a national security threat and recommended unwinding the acquisition.
Trump agreed, concluding that TikTok allows “China to track the locations of Federal employees and contractors, build dossiers of personal information for blackmail, and conduct corporate espionage”. It probably did not help that TikTok users were responsible for low turnout at a Trump rally in July. [5]
What Did the Executive Orders Do?
Trump issued the first executive order (“Order 1”) on August 6. It prohibited any person “subject to the jurisdiction of the United States” from doing business with ByteDance or any of its subsidiaries, including TikTok Inc, as of September 20. It is up to the Secretary of Commerce to specify the transactions covered by this order, but some options may include displaying ads, processing in-app microtransactions, and processing payments through US financial institutions. [6]
Trump issued the second executive order (“Order 2”) on August 14. It retroactively prohibited the acquisition of Musical.ly and ordered ByteDance to sell TikTok Inc to a corporation incorporated in the US or owned by Americans within 90 days of the order. A 30 day extension may be granted by the CFIUS. Before the sale can be completed, it must be approved by the CFIUS. Immediately after the sale, ByteDance must destroy all information on US users and certify the same to CFIUS.
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