Congress Takes Aim At TikTok and Other Foreign Adversary Controlled Applications

Washington, D.C. (May 2, 2024) – On April 24, 2024, President Biden signed into law the 21st Century Peace Through Strength Act, Pub. L. 118–50 (H.R.815), to provide military aid to Ukraine, Israel and Taiwan. Enacted as Division H of that law is the Protecting Americans from Foreign Adversary Controlled Applications Act (the “Act”), which stipulates that unless the Chinese-owned social-application network TikTok is sold within 270 days (subject to a one-time extension of up to 90 days), TikTok can no longer operate in the U.S. The Act is meant to end years of political debates over whether TikTok should be permitted to operate in the U.S. The Act also gives the President of the United States standing authority going forward to ban on national security grounds other applications with at least one million active users owned by a person or entity in a “foreign adversary country.”

The Act confers exclusive jurisdiction on the Court of Appeals for the District of Columbia Circuit to review any legal challenges to the Act. This provision ensures that only that court, which has institutional expertise in national security cases – and, of course, the Supreme Court – will decide the constitutional questions raised by the Act. If upheld by the courts, the Act will significantly augment the President’s statutory authority to regulate foreign business operations, beyond the powers the President has long enjoyed to (i) block transactions and freeze assets under the International Emergency Economic Powers Act (“IEEPA”), 50 U.S.C. §§ 1701–08, to address foreign-originated national security threats, and (ii) prohibit, modify or reverse certain business acquisitions by foreigners under the Committee on Foreign Investment in the United States (“CFIUS”) review process, 50 U.S.C. § 4565.

Congress Squarely Takes Aim at TikTok

TikTok is a social media software application owned by ByteDance Limited, a nominally private company headquartered in China. ByteDance purchased TikTok in 2017 from a U.S. startup called Musical.ly. TikTok says it has more than 150 million registered users in the U.S. Proponents of the Act contend that because all Chinese businesses are controlled by the Chinese government, TikTok poses a two-pronged national security threat by: (i) infringing on the privacy of American users, and (ii) enabling an unfriendly government to covertly shape American public opinion. TikTok has vigorously denied those charges.

The Act declares it unlawful to “distribute, maintain or update” or provide Internet hosting services to a “foreign adversary controlled application.” The Act, § 2(a)(1). The Act empowers the Attorney General to bring civil suits against “entities” for violating the Act. Id. § 2(d)(2). For each violation, each “entity” is subject to a base fine of $5,000, multiplied by the number of users who have used an application. Id. § 2(d)(1)(A). If TikTok indeed has 150 million users, it would face a civil fine of up to $750 billion. The Act exempts individual users of a proscribed application from punishment. Id. § 2(f)(2).

The Act defines a “foreign adversary controlled application” in two disjunctive parts. The first part specifically names TikTok. Id. § 2(g)(3)(A). ByteDance has 270 days (that is, until January 19, 2025) to sell TikTok or face a ban. Id. § 2(a)(2)(A). The President can extend this deadline one time by up to 90 days if the President determines that the divestiture process has made substantial progress. Id. § 2(a)(3).

Congress Takes Aim at All Social Media Applications Controlled by a Foreign Adversary

The second part of the definition of a “foreign adversary controlled application” authorizes the President to designate any social application or website that has at least one million active users and “controlled by a foreign adversary” that, in the President’s judgment, “present[s] a significant threat to [ ] national security.” Id. §§ 2(g)(3)(B) and 2(g)(2)(A)(ii). The term “foreign adversary” is defined by cross-referencing an existing law that restricts sensitive military items: China, Russia, Iran and North Korea. Id. § 2(g)(4) (referencing 10 U.S.C. § 4872(d)(2)). For purposes of the Act, an application is “controlled” by a foreign adversary if the company that owns the application is domiciled or based in one of those jurisdictions. Id. § 2(g)(1)(A). A company will also fall under that definition if at least 20 percent of its shareholders are based in one of those four adversary countries. Id. § 2(g)(1)(B). The Act does not differentiate between government-controlled companies and private companies.

To determine that an application is a national security threat, the President is only required to issue a public notice to that effect and a report to Congress explaining the basis of his judgment. Id. § 2(g)(3)(B)(ii). Therefore, while the President cannot unilaterally expand the list of adversary countries, he has wide latitude to ban any social application, apart from TikTok, that is “controlled” by an adversary country. An application designated by the President must divest its foreign ownership within 270 days (subject to a 90-day extension as discussed above) or be banned in the U.S. Id. §§ 2(a)(2)(B) and 2(a)(3).

Implications

This is not the U.S. government’s first attempt to ban what it considers to be nefarious Chinese social media applications. In August 2020, President Trump issued two executive orders to ban TikTok and WeChat, a chat application widely used within the Chinese-speaking world. President Trump did so by invoking his authority under IEEPA to prohibit “transactions” with a foreign component in the interest of national security. In TikTok Inc. v. Trump, 490 F. Supp. 3d 73 (D.D.C. 2020), a district judge in Washington D.C. enjoined the TikTok executive order because the IEEPA contains carve-outs (known as the “Berman Amendments” and codified at 50 U.S.C. §§ 1702(b)(1) and 1702(b)(2)) for personal communications and informational materials. In U.S. WeChat Users All. v. Trump, 488 F. Supp. 3d 912 (N.D. Cal. 2020), a magistrate judge in Northern California enjoined the WeChat executive order on the basis of the First Amendment rights of WeChat users. The new Biden administration withdrew both executive orders before an appellate court could weigh in.

Separately, concluding that ByteDance’s 2017 purchase of Musical.ly posed a potential national security threat, President Trump issued another executive order under his CFIUS authority to require ByteDance to divest its ownership of Tiktok. ByteDance and the U.S. government have been engaged over the years in inconclusive discussions over what mitigation measures ByteDance could take to allay U.S. security concerns. The passage of the Act was facilitated by growing impatience in Congress with those unfruitful conversations. Ultimately, the Biden administration supported the Act and participated in its drafting. Congress passed the Act by a lopsided margin.

The Act does not have a Berman Amendment-like limitation. In fact, its principal aim is to stop the flow of personal communications on TikTok and other social media platforms that the President determines are a threat to national security. To prevent piecemeal litigation and forum shopping, the Act provides that the D.C. Circuit has exclusive jurisdiction to hear challenges to the Act. The Act, § 3(b). By bypassing the district courts and by centralizing judicial review in the appellate court known for its national security expertise, Congress presumably hopes that any court review process can be completed expeditiously. TikTok is expected to file a lawsuit in the D.C. Circuit soon raising freedom of speech, due process, Takings Clause and Bill of Attainer Clause objections.

Conclusion

More than 70 years ago, Justice Robert Jackson wrote in the seminal case Youngstown Sheet & Tube Co. v. Sawyer that when the federal government acts pursuant to an express grant of authority from the Congress, it “personif[ies] the federal sovereignty” and will be accorded “the strongest of presumptions and the widest latitude of judicial interpretation.” 343 U.S. 579, 635–37 (1952) (Jackson, J., concurring). Here, after years of false starts, Congress has unambiguously instructed that TikTok (and other applications designated by the President under the Act) cannot operate in the United States under adversary foreign ownership. The D.C. Circuit (and possibly the Supreme Court) will have to decide whether this clear bipartisan legislative command is consistent with U.S. constitutional principles.

Lewis Brisbois’s attorneys are actively engaged in the wide range of legal issues in this area and are advising clients on managing legal and business risk as events continue to develop at an accelerated pace. For more information, contact the author or editors of this alert. Visit our Ukraine Conflict Response Practice page for additional alerts in this area.

Author:

Minyao Wang, Partner

Editors:

Justin Carl Pfeiffer, Partner

Andrew Pidgirsky, Partner and Chair of Ukraine Conflict Response Practice