Chinese social media App giant, TikTok is asking a court to push off a looming deadline that would require the short-form video app to be spun off from its Chinese parent company ByteDance this week, CNN reports.
According to the CNN report on Wednesday, the company ByteDance had on Tuesday petitioned a federal appeals court to halt the enforcement of an executive order put forth by President Donald Trump in August that would mandate the sale by Thursday, 12th November 2020.
The outgoing President of the United States, President Donald Trump had given the November 12 deadline to ByteDance to sell its U.S. assets, over security concerns.
President Trump in August ordered Beijing-based ByteDance to sell TikTok to American buyers by the Nov. 12 date, alleging that the short-form video app represents a national security threat from the Chinese government. That came after a probe into ByteDance’s 2017 acquisition of Musically (the predecessor to TikTok) initiated in the fall of 2019 by the Committee on Foreign Investment in the United States (CFIUS), an interagency group led by the Treasury Department that has the authority to block foreign transactions involving U.S. entities.
In the petition filed on Tuesday, ByteDance and TikTok asked the court to “hold unlawful, vacate, enjoin and set aside the Divestment Order and the CFIUS Action, and grant any further relief that may be appropriate.”
The companies said they intend to file a motion to stay enforcement of Trump’s divestment order “only if discussions reach an impasse and the government indicates an intent to take action to enforce the Order.”
TikTok said for the past year it has “actively engaged with CFIUS in good faith to address its national security concerns, even as we disagree with its assessment.” But in the almost two months since Trump gave preliminary approval for ByteDance to sell the app to Oracle, Walmart and other U.S. buyers, according to TikTok, the company has “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 a 30-day extension that is expressly permitted in [Trump’s] August 14 order,” TikTok said in a statement.
“Today, with the November 12 CFIUS deadline imminent and without an extension at 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 U.S.”
TikTok added, “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.”
Separately, a federal court temporarily blocked Trump’s order that would ban U.S. companies from doing business with TikTok as of Nov. 12.
In the petition for review filed with the D.C. appeals court, ByteDance and TikTok alleged that CFIUS’s review of the Musical.ly acquisition — and Trump’s subsequent order — exceed the authority granted to the Trump administration under U.S. law.
That’s because CFIUS is authorized to review (and the president is allowed to prohibit) “a specified ‘covered transaction’ to address risks to national security created by that transaction,” ByteDance and TikTok argued.
“Here, that 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.”
ByteDance and TikTok also alleged (as they have in previous legal filings) that CFIUS’s action and Trump’s executive order violate the companies’ due process rights. That’s because “they prematurely terminated the review to which Petitioners were entitled and denied them a meaningful hearing,” ByteDance and TikTok said. Moreover, the companies claimed, the CFIUS action violated the Administrative Procedure Act because the agency “failed to adequately explain its decision and did not take account of the alternative mitigation proposals submitted by Petitioners.”
In addition, the companies alleged in their filing, Trump’s order forcing the divestment of TikTok’s U.S. business “without fair compensation would constitute an unlawful taking under the Fifth Amendment,” which prohibits the government from taking private property for public use without “just compensation.”