TikTok Appeals Divestiture Order, Citing Wait For Gov. Response

On Tuesday, TikTok filed an appeal with the D.C. Circuit regarding the August executive order and the related Committee on Foreign Investment in the United States (CFIUS) action, which includes its purported “determination to reject mitigation, truncate its review and investigation, and refer the matter to the President.”

Specifically, TikTok and its parent company ByteDance claimed the executive order and the CFIUS Action “seek to compel the wholesale divestment of TikTok, a multi-billion-dollar business built on technology developed by Petitioner ByteDance Ltd., based on the government’s purported national security review of a three-year-old transaction that involved a different business.” TikTok averred that this aforementioned conduct and “attempted taking exceeds the authority granted to Respondents under Section 721, which authorized CFIUS to review and the President to, at most, prohibit a specified ‘covered transaction’ to address risks to national security created by that transaction.” However, TikTok asserted that this “covered transaction” was “ByteDance’s acquisition of the U.S. business of another Chinese-headquartered company, Musical.ly – a transaction that did not include the core technology or other aspects of the TikTok business that have made it successful and yet which the Divestment Order now seeks to compel ByteDance to divest.” Therefore, TikTok and ByteDance contended that the Musical.ly acquisition is unrelated to TikTok and national security concerns. Furthermore, TikTok claimed that the order and CFIUS action violate the Due Process Clause, the Administrative Procedure Act, and is an unlawful taking under the Fifth Amendment.

The required divestiture is set to occur by tomorrow, November 12, and TikTok has sought immediate relief on the imminent deadline, asserting that it has not heard from CFIUS in weeks about ByteDance’s required TikTok divestiture. The deadline was for ByteDance to “divest all interests and rights in (i) any tangible or intangible property, wherever located, used to enable or support ByteDance’s operation of the TikTok application in the United States… [and] (ii) any data obtained or derived from TikTok application or Musical.ly application users in the United States.” ByteDance requested a 30-day extension, but it has not received any communication from the Committee about its request. The Eastern District of Pennsylvania granted a preliminary injunction against some restrictions set for Nov. 12.

In a statement, TikTok felt it had no choice but to appeal after not hearing from the administration. “For a year, TikTok has actively engaged with CFIUS in good faith to address its national security concerns, even as we disagree with its assessment,” TikTok said in a statement. “In the nearly two months since the President gave his preliminary approval to our proposal to satisfy those concerns, we have offered detailed solutions to finalize that agreement – but have received no substantive feedback on our extensive data privacy and security framework.”

“Facing continual new requests and no clarity on whether our proposed solutions would be accepted, we requested the 30-day extension that is expressly permitted in the August 14 order,” the statement continued. “Today, with the November 12 CFIUS deadline imminent and without an extension in hand, we have no choice but to file a petition in court to defend our rights and those of our more than 1,500 employees in the US. We remain committed to working with the Administration — as we have all along — to resolve the issues it has raised, but our legal challenge today is a protection to ensure these discussions can take place.”

In an attempt to resolve the Trump administration’s concerns, ByteDance agreed to a deal with Oracle and Walmart, which the U.S. government has since approved, however, the deal remains pending because the Chinese government has not approved the deal. TikTok’s continuing challenge against the Executive Order is still before the District of Columbia District Court.

TikTok is represented by Covington & Burling.