China's ByteDance seeks US court intervention to block forced TikTok sale

ByteDance, the Chinese owner of TikTok, asked the federal appeals court in Washington to intervene to avoid the US government from requiring it to market the popular video-sharing iphone app or face a ban in America.

The Beijing-based company is wanting to block an order forcing it to market by Thursday its most significant international business, a viral video service with up to 100 million users in the US. The Trump administration issued an executive order banning TikTok in the US on national security grounds, and demanded the Chinese company cede control of TikTok to American investors.

A deal was eventually struck to market about 20 % of a fresh TikTok entity to Oracle and Walmart, but that agreement is now in limbo after Joe Biden won the US presidential election and a legal challenge to the Trump administration’s ban. A US security panel had previously set a November 12 deadline for TikTok to finalise an accord, and TikTok has requested a 30-day extension to keep working toward a solution that would avert a complete sale of TikTok as required in the order.

That request went unanswered, though TikTok is hoping that whatever the outcome of Tuesday’s petition, an extension could be granted, a person familiar with the process said.

Facing the Thursday deadline set by the Committee on Foreign Investment (Cfius in the US, TikTok said, it had no choice but to carefully turn to the appeals court “to guard our rights and the ones of our more than 1,500 employees in the US”. ByteDance said the divestment order violated its due process rights and rules of administrative procedure that want the government to explain its reasoning for regulatory decisions.

“For a year, TikTok has actively engaged with Cfius in good faith to handle its national security concerns, once we disagree using its assessment,” TikTok said in a statement. “In the practically two months because the president gave his preliminary approval to your proposal to meet those concerns, we've offered detailed solutions to finalise that agreement - but have obtained no substantive feedback on our comprehensive data privacy and security framework.”

The US contends that TikTok is a national security threat, saying it could give China’s government usage of the non-public data of an incredible number of Americans because it’s owned by a Chinese company.

Tuesday’s court filing includes a letter compiled by Cfius explaining the government’s national security concerns with ByteDance’s ownership of TikTok, the 1st time those concerns have been made public in such detail.

The July 30 letter from the Treasury Department is founded on unclassified information, though Cfius said its determination was also predicated on classified information.

Cfius also said ByteDance stores user data on servers hosted by China’s Alibaba and cited press reports that Alibaba actively supports the Chinese government’s intelligence and surveillance efforts.

Since it faced criticism earlier this season from US President Donald Trump and the order to discover a buyer because of its American operations, TikTok had been in talks with a number of potential suitors, including Microsoft, though eventually ByteDance selected the dual proposal from software maker Oracle and retail giant Walmart.

In its petition Tuesday, ByteDance said that it submitted a fresh proposal on November 6 that called for a restructuring of TikTok in the US and the creation of a fresh entity that might be wholly owned by Oracle, Walmart and existing US investors. Mr Trump has voiced support for such an arrangement. The brand new company would be in charge of handling data and content moderation for US users, ByteDance said.

ByteDance has recently won court orders blocking a couple of prohibitions on TikTok that Mr Trump unveiled in August. The prohibitions that TikTok has successfully halted in court could have also gone into effect immediately on November 12, stopping new users from downloading the software and forbidding companies from providing the underlying web services which make it accessible.

But its petition on Tuesday targeted a separate process: an order by Cfius requiring it to divest TikTok by November 12. The implications of the divestment order are less clear. The language of the order provides attorney general authority to “take any steps necessary” to enforce the order. The Justice Department didn’t react to a request for comment.