By Katy Stech Ferek and John D. McKinnon 

The Trump administration said it will ban downloads of the Chinese-owned video-sharing app TikTok and U.S. downloads and support of WeChat, China's popular messaging and electronic payment app, after Sunday night over national-security and data-privacy concerns.

Commerce Department officials on Friday released a series of prohibited transactions for both of the apps, which have tens of millions of U.S. users. Under the rules set forth in two separate orders, U.S.-based individuals will not be able to download or update either app through Google's and Apple's app stores after midnight on Sunday.

In a key concession, Commerce officials said U.S. companies, for now, would be allowed to continue using WeChat in China, where many firms use the app for payments from customers.

The Commerce Department said it would order a full ban for TikTok by Nov. 12 but noted that discussions for a deal that would incorporate data safeguards could enable U.S. users continued access of TikTok.

As of Sunday, TikTok users in the U.S. will be blocked from maintenance and upgrades, according to a Commerce release. The rules enable continued usage of TikTok until Nov. 12.

Would-be WeChat users will be hit harder. Downloads of the app will be prohibited after Sunday in the U.S. And U.S. support for the app -- through internet traffic services such as data hosting and content caching -- will be prohibited at the same time.

The net effect will be to seriously degrade its functionality for users in the U.S., senior Commerce officials said. Users will experience slow speeds to the point of timing out, so while the service might still be technically usable, it won't be very functional after Sunday night, officials said.

While U.S. companies would be allowed to continue using WeChat outside of the country, the Commerce announcement notes that the agency could prohibit overseas use of WeChat by Americans in the future. It also could move against other online services offered by WeChat parent Tencent Holdings Ltd. such as its gaming platforms, according to the Commerce announcement.

Tencent didn't immediately respond to requests for comment on the new rules. WeChat has 19 million daily active users in the U.S., according to data provider Apptopia.

A TikTok spokesman called the Commerce rules disappointing, saying: "We've already committed to unprecedented levels of additional transparency and accountability well beyond what other apps are willing to do, including third-party audits, verification of code security, and U.S. government oversight of US data security."

In a call with reporters on Friday, a senior Commerce official declined to explain how the new rules would be enforced or whether it would impose monetary penalties for violations.

Commerce officials said the Chinese-owned apps pose similar threats to Americans.

"Each collects vast swaths of data from users, including network activity, location data, and browsing and search histories," the Commerce Department said. "Each is an active participant in China's civil-military fusion and is subject to mandatory cooperation with the intelligence services of the [Chinese Communist Party]."

Commerce Secretary Wilbur Ross said on Fox Business Network on Friday morning that he made the decision on the rules after President Trump ordered his department to review WeChat for national-security concerns last month.

"China has been taking all kinds of data...that's what we're trying to squelch," he said.

As of Sunday, Commerce said it will block "any provision of service to distribute or maintain the WeChat or TikTok mobile applications, constituent code, or application updates through an online mobile application store in the U.S." It will also block any money transfers through the WeChat app for U.S.-based users.

Commerce officials delayed prohibition of transactions that would greatly impair TikTok's user experience until Nov. 12, matching the 90-day deadline that President Trump set for the divestiture of TikTok's U.S. operations. In that order, Mr. Trump said that TikTok parent company, Beijing-based ByteDance Ltd., "might take action that threatens to impair the national security of the United States."

TikTok officials said the app surpassed two billion global downloads last month and has roughly 50 million daily active users in the U.S. The Trump administration contends that the data TikTok collects from U.S. consumers could be shared with the Chinese government. TikTok has said it would never hand over such data.

TikTok is hugely popular among young people, and Friday's move could affect the quality of the app that has become a fixture on the smartphones of millions of American teenagers. It also ratchets up the pressure on ByteDance to reach a deal with the U.S. government. A Commerce official denied that the decision to postpone a TikTok shutdown until after the November election was influenced by political concerns.

ByteDance has been locked in negotiations over how to address the U.S. government's security concerns, and this week seemed to be gaining momentum toward an agreement that could be signed by President Trump. A consortium of U.S. companies, led by Oracle Corp., are discussing a plan to take a majority stake in a new company that would oversee TikTok's operations and ensure its data security.

People involved with the negotiation talks have said multiple times throughout the week that an agreement appeared imminent, even while key issues were still being ironed out. But the announcement on Friday indicates there may be further distance between the two sides than previously understood.

A senior Commerce official said Friday that as the TikTok deal moves forward, Mr. Ross is prepared to "change or even potentially remove the restrictions [on TikTok] if the President agrees to a deal."

On Thursday, a federal judge heard arguments from WeChat users who sued to block Mr. Trump's executive orders in August that sought to impose limits on the app but didn't immediately issue a ruling

In a filing on that case Wednesday, Justice Department lawyers said the government wouldn't pursue legal action against individuals who use WeChat "to convey personal or business information between users," a clarification plaintiffs said still didn't make clear which specific activities would be barred.

WeChat bundles social media, text messages, mobile payments, corporate marketing and other functions into one app. While WeChat's users are primarily in China, the app is important among the Chinese diaspora in the U.S. and is widely used by foreigners with professional or personal ties in China.

WeChat and its domestic sister app Weixin have about 1.21 billion monthly active users combined. On an earnings call in August, Tencent executives sought to distinguish the two apps and allay investors' fears. The company generates less than 2% of revenue from the U.S., a Tencent executive said at the time.

American brands from Walt Disney Co. to Walmart Inc. rely on WeChat to reach and collect payments from customers in China. Nine out of 10 companies surveyed by the American Chamber of Commerce in Shanghai said the ban would hurt their Chinese operations, should the ban extend to China.

Launched by Tencent in 2011, WeChat has become the go-to example of China's capacity to innovate. In addition to running the world's most-used social media app, Tencent is the world's biggest videogame company by revenue. In the U.S., Tencent owns Riot Games Inc., creator of the popular videogame "League of Legends," and has stakes in "World of Warcraft" maker Activision Blizzard Inc. and Epic Games Inc., developer of the popular game "Fortnite."

After Mr. Trump's August executive orders, Tencent hired Edward Royce, former chairman of the House Foreign Affairs Committee, and four other lobbyists from Brownstein Hyatt Farber Schreck LLP, according to a disclosure filing.

With a market value of more than $645 billion, Hong Kong-listed Tencent is one of the biggest companies in China and works closely with the government. Chairman and Chief Executive Pony Ma has been a member of the rubber-stamp National People's Congress since 2013.

Jing Yang and Georgia Wells contributed to this article.

Write to Katy Stech Ferek at katherine.stech@wsj.com and John D. McKinnon at john.mckinnon@wsj.com

 

(END) Dow Jones Newswires

September 18, 2020 11:27 ET (15:27 GMT)

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