By Katy Stech Ferek
TikTok's lawyers on Sunday awaited a ruling from a federal judge
on the company's request to postpone a U.S. ban on downloading the
popular video-sharing app, set to take effect around midnight.
Judge Carl Nichols of the U.S. District Court in Washington,
D.C., said Sunday morning that he would decide by the end of the
day whether the Trump administration's national-security concerns
are urgent enough for it to go through with the proposed download
After 11:59 p.m. Eastern time on Sunday, U.S. authorities could
force Apple Inc. and Alphabet Inc.'s Google to remove TikTok from
their mobile app stores, preventing new downloads by people who
don't already have the app and restricting current users from
downloading upgrades that keep the app fresh. Until recently, more
than 400,000 people in the U.S. each day were downloading TikTok,
the company has said.
The court drama played out as the app's long-term fate remained
uncertain. TikTok and ByteDance executives are seeking approval
from officials in the U.S. and China for a proposal to preserve the
app's U.S. presence by partnering with Oracle Corp. and Walmart
While the broad strokes of a deal gained preliminary approval
from President Trump on Sept. 19, TikTok, Oracle and Walmart still
need to hammer out the details, including ownership structure. The
deal also requires approval from The Committee on Foreign
Investment in the U.S., a panel of national-security experts who
oversee cross-border deals.
The U.S. Commerce Department on Nov. 12 plans a full ban
designed to make the app unusable if an American deal for TikTok
isn't completed by then. TikTok says the app has more than 50
million daily active U.S. users.
Governments in both countries are actively reviewing ByteDance's
proposed resolution to the standoff. They are driven by competing
In China, officials are worried about ByteDance losing control
of the popular app and its underlying technology, and about the
precedent that would be set by U.S. owners taking over a
China-based company's intellectual property.
In the U.S., officials have said they are reviewing any deal
with an eye toward meeting their own goal: wresting control of
TikTok from Chinese owners over concerns that the data TikTok
collects from U.S. consumers could be shared with the Chinese
government, threatening U.S. national security. TikTok has said it
operates independently of the Chinese government and that it
wouldn't turn over its data if pressured.
ByteDance's proposed deal with Oracle and Walmart is designed to
address concerns on both sides of the Pacific Ocean.
Under a preliminary deal that Mr. Trump approved in concept,
Oracle and Walmart would take a combined 20% in TikTok Global, a
new U.S.-based company that would run the global service. Details
of the structure are still in flux, people involved with the deal
talks have said, as the companies try to ensure that it will win
final approval from governments on both sides.
One point of confusion has been the exact ownership breakdown,
with the TikTok side and Oracle having issued contradictory
messages since the preliminary deal was announced. A spokesman for
ByteDance has said that it would directly hold an 80% share of
TikTok Global, while Oracle has said publicly that Americans will
be the majority owners and ByteDance will have no ownership in
One way those claims could square, according to some people
familiar with the talks, is to have ByteDance initially own its
majority stake in TikTok when the deal is completed, and then have
it reduced soon afterward. That could come by distributing
ByteDance's stake to existing shareholders, many of whom are U.S.
investors, and through a fundraising round ahead of a U.S. initial
public offering that deal participants have said would come within
But another person close to the situation disputed that theory
and said Americans will be the majority owners as soon as the new
company is formed.
With the deal reviews continuing, TikTok argued in court Sunday
that the imminent ban on downloads would harm its business. "This
is just punitive," TikTok lawyer John Hall said during Sunday
morning's arguments. "This is just a blunt way to whack the company
now while doing nothing to achieve the stated objective of the
Justice Department lawyer Daniel Schwei defended the federal
government's intent to protect TikTok users' personal data and stop
new users from potentially putting even more data at risk.
Commerce Secretary Wilbur Ross is entitled "to address the most
important, immediate threat to national security which is new users
continuing to sign up and making their data vulnerable to the
Chinese government," Mr. Schwei said.
In a memo filed with the court on Friday, the U.S. government
said one reason for concern is a "high level" of activity between
U.S.-based TikTok users and IP addresses located in China and owned
by a Chinese company. The memo also said that before February 2019,
TikTok stored its U.S. user data in China.
TikTok has said it hasn't and wouldn't share information about
U.S. users with the Chinese government.
Prior to Sunday's hearing, other tech companies weighed in on
"There is no previous example in U.S. history of a complete ban
of a media platform that directly deprives a quarter of the U.S.
population access to information on that platform," NetChoice, a
trade group that represents online giants such as Amazon.com Inc.,
Facebook Inc. and Google, said in a court filing.
The group also warned that the Trump administration's ban could
provide other governments "with new justifications for preventing
American technology businesses from accessing foreign markets." It
said the U.S. government hasn't provided "evidence that China's
Communist Party or military have acquired data on TikTok's users in
the United States," adding that the government could address its
concerns in other ways, such as data security safeguards.
Vanessa Pappas, TikTok's interim head, had previously encouraged
other tech companies to support TikTok's litigation.
Write to Katy Stech Ferek at email@example.com
(END) Dow Jones Newswires
September 27, 2020 15:58 ET (19:58 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
Historical Stock Chart
From Sep 2020 to Oct 2020
Historical Stock Chart
From Oct 2019 to Oct 2020