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TikTok to sue Trump administration over ban

TikTok announced it would be suing the Trump Administration for banning transactions with parent company ByteDance. The Final Round panel breaks down the latest TikTok news and how this could impact other Chinese Tech companies.

Video Transcript

SEANA SMITH: Welcome back to "The Final Round." TikTok filing a lawsuit against the US government this morning, challenging the Trump administration's effort to ban the company from the US. Now TikTok is saying that the ban would take place without due process. Akiko, I'm curious to get your thoughts on this, because you've got TikTok arguing that it's not a national security threat, arguing that it shouldn't have to, I guess, sell its US division, and that there's no evidence to justify this action.

AKIKO FUJITA: Yeah, so not necessarily that the national security issue-- TikTok is essentially saying you judged us based on information that was outdated. And that we talked with you, came to the table in good faith, but we were not given due process. Now I want to pull up the statement from TikTok.

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Certainly a very lengthy one that was released, but here's what it reads in part. They say "to be clear, we prefer constructive dialogue over litigation. But with the executive order threatening to bring a ban on our US operations, eliminating the creation of 10,000 American jobs and irreparably harming the millions of Americans who turn to this app for entertainment, connection, and legitimate livelihoods that are vital, especially during the pandemic, we simply have no choice."

Now, to be clear, TikTok faces two specific orders here. One is that executive order that essentially bans the use of TikTok within 45 days. And then you've got that CFIUS ruling, the Committee on Foreign Investment into the US, that order that says that ByteDance, the parent company of TikTok, needs to unwind its acquisition of Musical.ly, which essentially spells the end of TikTok as we know.

And the lawsuit today hit on both of those issues. On the issue of the executive order, TikTok essentially says that it was a misuse of IEEPA, which is the International Emergency Economic Powers Act. It's a lengthy acronym there. But essentially, that is used by the president to address specifically issues that are an unusual and extraordinary threat. And TikTok is saying not only does the executive order ignore due process, it authorized the prohibition of activities that have not been found when unusual to be an unusual and extraordinary threat.

And on the issue of CFIUS, going back to your point, Seana, which is the national security concerns, because that is what CFIUS investigates, TikTok is saying, essentially, look, we have changed our policies to address this. And you simply did not acknowledge it in your investigation. So that's where we stand right now.

We're still looking at a 45-day-- a ban that takes effect within 45 days. And then TikTok or ByteDance needs to unwind Musical.ly and that acquisition and sell it to a US company within 90 days. So those still stand. Nothing has changed as a result of the lawsuit today.

RICK NEWMAN: Hey, Akiko, given what we know about the way President Trump's executive orders work, I mean, so many of them either get overturned or postponed. And if you go with that 90-day deadline for which the ownership of TikTok would have to transfer, I mean, that is beyond November 3, Election Day. And if you can imagine some delay here, you can see this whole thing getting kicked into 2021, and perhaps even going away if Biden becomes president. Is it--

AKIKO FUJITA: Yeah, I think there is--

RICK NEWMAN: Am I reading that right?

AKIKO FUJITA: There is an argument to be made that the move from TikTok today essentially was a delaying tactic. And that's what some would argue, that TikTok is trying to buy some time here because, to your point, they've got that 45-day deadline and then the 90 days to unwind the acquisition. Having said that, I've been speaking with a number of former CFIUS members who say they simply haven't seen any case that has been overturned once there is a CFIUS ruling, because the courts don't want to challenge a president essentially going after a company for national security concerns.

And one former board member went as far as to say that CFIUS doesn't have to prove exactly what the national security threat is. It's simply enough to say there are concerns about national security with a company. They can compel a company to unwind that deal. So when you look at past history, it doesn't look good for TikTok right now.

But to your point, no question that President Trump overall has been ramping up pressure on China. And some would argue that's been a political move going into the November elections.

RICK NEWMAN: Just one other quick one, Akiko-- does TikTok really have 10,000 American employees in the United States?

AKIKO FUJITA: It's an interesting point that you make. And how many of those are actually the content creators themselves, those who are on the platform as well. There's no question TikTok has been ramping up hiring within the US, not just on the content side of things, but on the advertising side of things. So that is the case that they have made in the past as well, that we have created a lot of jobs.

And again, they-- in the statement today, talking about the lawsuit, did reiterate the point that they've got an American CEO, Kevin Mayer, who we all know came from Disney. And they do not store data of US users in China. Those are stored in the US with a backup in Singapore.

SEANA SMITH: Certainly an interesting story, a developing story changing by the day here. So one that we will continue to watch. But Akiko, thanks so much for breaking that down for us.