TikTok sues U.S. government over Trump's executive order

TikTok confirmed plans to sue the U.S. government. Yahoo Finance’s Akiko Fujita discusses.

Video Transcript

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JULIE HYMAN: The parent company of TikTok says it's filed a lawsuit against the US government. It says it has not had a chance to adequately respond and given due process to argue that it is not a national security threat. Our Akiko Fujita is joining us now to talk to us about this. Has there ever been any kind of situation like this before, Akiko, where a company has come in and tried to make this argument?

AKIKO FUJITA: There has been precedent before in terms of a company arguing that they haven't been given due process, which is essentially what TikTok is arguing. But nobody has had success in trying to overturn, specifically the CFIUS ruling. So-- so let's kind of backtrack a bit to talk about where things stand right now because it can be a little convoluted.

Right now, TikTok is dealing with two specific executive orders. One is that executive order President Trump signed banning users in the US from using that app within the next 45 days. There's also the CFIUS ruling, which essentially says that TikTok, the app, which came about as a result of ByteDance acquiring Musical.ly. That acquisition needs to be unwound because of national security concerns.

And this lawsuit hits on both of those issues. On the issue of that executive order signed by President Trump, TikTok says that they were not granted due process, that essentially, it has worked with the US government and taken extraordinary measures, as the company describes it, to protect the privacy and security of TikTok's US user data. And TikTok says it is not based on a bonafide national emergency and authorizes the prohibition of activities have not been found to pose an unusual and extraordinary threat. So TikTok is saying there is no process here for that specifically.

The other issue TikTok is hitting on is that investigation by CFIUS, which is prompting the unwind of this deal between ByteDance and Musical.ly, specifically, TikTok saying CFIUS never articulated any reason why TikTok security measures were inadequate to address any national security concerns and effectively terminated formal communications with the plaintiffs well before the conclusion of that initial statutory review period. Now, on that specific issue, I can tell you I've been having conversations with those who have sat on that CFIUS board who say essentially, that's just how CFIUS is run, that they're-- they specifically don't have to give a reason as to why these deals need to be unwound, that it is enough for CFIUS to come back and say there is a national security concern in order to force that unwind. So this lawsuit has been filed. You can certainly argue, if anything, this is a delaying tactic because right now, TikTok is looking at a deadline that's coming up quickly in September.

JULIE HYMAN: So what happens next, Akiko?

AKIKO FUJITA: Well, what happens next is-- I mean, there's a number of things we can look to. One is the potential acquisition of TikTok's US operations along with some operations in Canada, Australia, and New Zealand. That has been bid. We've been talking about Microsoft looking into buying that part of the US operations. Oracle also coming out.

There's a Reuters story today that says, essentially that ByteDance's investors are looking to take a majority stake in any kind of spin-off. So that's the next thing to look for here because regardless of the lawsuit that's been filed today, as things stand, there is still that deadline on September 15, which essentially bans the app from the US. And TikTok-- or ByteDance, unless it unwinds the deal, its acquisition of Musical.ly is looking at an app-- or at a ban altogether here in the US.

JULIE HYMAN: And I guess even though they filed the lawsuit today, that doesn't mean they're actually going to court anytime soon.