Social media platform TikTok has made news headlines around the world recently, because Donald Trump has said that its U.S. operations must be sold to a “very American” company by 15 September, or it will be banned in the United States.

In this article, we’ll take a brief look at what has led to this situation, what it means from a legal perspective, and consider what might happen next.

Why does Donald Trump hate TikTok?

Ostensibly, U.S. president Donald Trump is taking action because of privacy concerns that the app is collecting the data of U.S. citizens and handing it over to Chinese government agencies for surveillance.

It is worth noting here that Donald Trump is not alone with these concerns –  both Republicans and Democrats in the U.S. have voiced concerns about TikTok, along with many data privacy campaigners.

However, the context and background of Trump’s statements suggest that he probably isn’t acting solely out of concern for the privacy of U.S. citizens’ data.

The political context – protectionist policies and a trade war with China

Throughout his presidency, Mr Trump has claimed his policies are about putting “America first”.

In practice this has meant a range of protectionist policies aimed at shielding American companies from foreign competition, although the globalised nature of supply chains has meant that these policies haven’t always served to benefit U.S. companies.

One of Trump’s main targets for these policies has been China, and increasing tariffs on Chinese imported goods to the U.S.

As noted in this report from the BBC back in January, tit-for-tat retaliations back and forth between the U.S. and China have long since become an all-out trade war. The U.S. – China trade war even has a lengthy Wikipedia page devoted to it.

The personal context – hurt feelings and a poorly attended rally

Outside of Trump’s trade war with China, there is another potential reason for Trump to have TikTok in his crosshairs.

Back in June, Trump planned to hold a campaign rally in Tulsa Oklahoma. The rally was meant to be a return to the type of campaign events that Trump loves, surrounded by loyal fans. But it didn’t work out that way.

Trump announced that he wanted to hold the rally on 19 June, which is a holiday known as Juneteenth in the United States, which celebrates the Emancipation Proclamation which ended slavery in the U.S.

Holding a campaign rally on that particular holiday, in a city which was the site of the single worst incident of racial violence in American history, drew the ire of many people.

In response, a campaign formed on TikTok and Twitter that encouraged people to reserve seats to the rally using false information.

The campaign’s intention was that the Trump campaign would have false expectations of a large gathering, and it was a spectacular success.

Ahead of the rally, the Trump campaign boasted that it had nearly a million people registered to attend, though when the time came, only 6,200 attended.

As noted in this article from Forbes, “about two weeks later, Secretary of State Mike Pompeo was the first Trump official to talk publicly about a possible TikTok ban.”

Though the report concedes that “surely no one other than Trump and perhaps a few other White House denizens understand the president’s true motivations for the ban. But as a hypothesis, it makes sense and has a compelling timeline.”

I guess we’ll never know for sure, but it’s worth considering in the broader context of Trump’s motivations.

So, what does this mean from a legal perspective?

In short, banning TikTok in the U.S. is not quite as simple as Trump and Pompeo have suggested.

Although India has recently banned TikTok by blocking targeted servers and users within the country, and Australia is considering something similar (incidentally, this is broadly how the Great Chinese Firewall works) American law doesn’t have any precedent for blocking software in that way, so it could prove difficult to implement legally.

As is laid out carefully in this report from Law.com, TikTok appears to currently be in compliance with all relevant areas, giving the U.S. authorities little room to take punitive action against the platform.

What could happen though, as noted in this article from The Verge, is that Trump could call on the Committee on Foreign Investment in the United States (CFIUS), which oversees mergers and investments involving non-US companies:

“If CFIUS decides Chinese ownership is a problem, the council could cause a lot of trouble for TikTok. In recent years, CFIUS has rejected some high-profile merger and acquisition plans — including a Chinese company’s proposed purchase of Grindr, which it nixed on national security grounds. The council could make TikTok restructure in a way that further separates its US presence from its Chinese one, or even make ByteDance (TikTok’s parent company) sell off Musical.ly, a Chinese company whose American app helped TikTok launch in in the US. It’s still not precisely a “ban,” though — and it certainly doesn’t generalize to all Chinese social media apps.”

What comes next?

The short answer is, it’s difficult to know.

TikTok has recently threatened to take legal action against the U.S. saying it would “pursue all remedies available” to “ensure the rule of law is not discarded”.

But, the company did note that it had engaged with the U.S. authorities and “expressed our willingness to pursue a full sale of the US business to an American company.”

And these recent moves have encouraged Microsoft to step up as a potential acquirer.

Now, in a highly strange move, Trump has recently said that he would support the sale to Microsoft, just as long as the U.S. government received a “substantial portion” of the sale price.

Without really explaining why the US treasury should be entitled to a cut of any deal he said “It’s a little bit like the landlord-tenant — without a lease, the tenant has nothing. So they pay what’s called ‘key money,’ or they pay something. But the United States should be reimbursed or should be paid a substantial amount of money, because without the United States they don’t have anything.”

The Foxrock Academy view though is that, as things stand, the most likely outcome appears to be an acquisition of TikTok’s U.S. operations by Microsoft.

What are the implications of a potential sale of TikTok’s U.S. operations for Irish users?

Nothing much will likely happen for Irish users. They will continue to be able to use Tiktok.

What are the implications of a potential sale of TikTok’s U.S. operations for Ireland?

There will be plenty of work for Irish lawyers.

Only nine days ago (29 July 2020), TikTok moved responsibility for the processing of personal data for all EU-based users from a US-based company (TikTok Inc) to an Irish-based company, (TikTok Ireland).

Then, two days ago (6 August 2020), TikTok announced that it intended to build a US$500m data centre in Ireland to process this EU-based personal data.

This was a good move by the company, for two big reasons:

1: The data protection reason

As we examined in this recent article, processing EU users’ data outside of the EU has become significantly more complicated post-Schrems II. Having an EU-resident entity act as Data Controller for EU users’ data is much more straightforward from a regulatory perspective.

2: The M&A reason

Any potential sale of TiKTok’s US operations would have been significantly more complicated if TikTok Inc were still the data controller of EU users’ data.

Now, U.S. based users’ data is processed by a US based company (that will form part of the sale). EU based users’ data is processed by an EU based company (that likely will not form part of the sale).

This pre-transaction separation will significantly simplify the M&A lawyers’ work (For further information on M&A, please see our “Understanding Mergers & Acquisitions” course.)

An opportunity for Irish data protection lawyers

Given the increased importance of TikTok Ireland, it is unsurprising that TikTok has been ramping up its Irish legal team over the last few months.

In particular, it is currently hiring a number of data privacy counsel for its Irish operations.

This is a great example of the world-class opportunities available for Irish law students who wish to specialise in the area of data protection.

About The Foxrock Academy

The Foxrock Academy helps students and graduates to secure internships and traineeships at prestigious corporate law firms.

It is our mission to open up the legal profession to a broader pool of talent.

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