TikTok’s Uncertain Future in the Short-Form Video app Market

Written By: Edgar Guzman

TikTok, a short-form video social networking application owned by Chinese company ByteDance, has amassed worldwide popularity since late 2018. Unfortunately, alongside a rise in popularity, the app has gained controversy with U.S. lawmakers raising “national security and privacy concerns over ByteDance’s ties to the Chinese government.”[1]

In late 2019, a college student named Misty Hong filed a class-action lawsuit in California alleging that “TikTok and its Chinese parent company, ByteDance, neglected their duty to handle user data with care and knowingly violated a slew of statutes governing data gathering and the right to privacy.”[2]

Under the direction of President Trump and the U.S. Treasury, the Committee on Foreign Investment in the United States (“CFIUS”) has conducted investigations into the acquisition of Musical.ly by ByteDance.[3] CFIUS is a committee that “has the power to block or unwind deals involving foreign investors, and the President of the United States has ultimate authority over its decisions.”[4] According to a report by the Congressional Research Service, the statutory process for CFIUS “sets a legal standard for the President to suspend or block a transaction if not other laws apply and if there is ‘credible evidence’ that the transaction threatens to impair the national security.”[5]

The power afforded to CFIUS investigations is evident based on precedent. Based on similar concerns surrounding personal data collection from application users, CFIUS has previously “forced Chinese investors to divest from PatientsLikeMe, a healthcare startup, and Grindr, an online dating platform, both bought by U.S.-based companies.”[6]

In an Executive Order issued on August 6, 2020, President Trump addressed national security concerns surrounding TikTok.[7] The executive order “seeks to ban business dealings with TikTok by any US citizen or organization after Sept. 20,” while a second executive order, signed on August 14, requires “any sale or transfer of TikTok [to] be approved by CFIUS.”[8] In response, TikTok filed a lawsuit against the U.S. government stating that President Trump’s orders are not supported by evidence or due process, and “disagree[ing] with the characterization of TikTok as a national security threat,” further commenting “that the Trump administration ignored all of TikTok’s efforts to address those concerns.”[9] These efforts included “spen[ding] nearly a year working in good faith to give the CFIUS requested details and information about TikTok’s Business.”[10]

For now, the Trump administration demands TikTok operations be placed in U.S. hands and, as an alternative solution, TikTok and Oracle have agreed to become business partners since “Microsoft announced that it will not buy TikTok’s U.S. operations from ByteDance.”[11] While the exact nature of the agreement and whether it will allow TikTok to survive a ban remains unknown, other competitors are taking advantage of the situation, including Facebook’s new Reels feature on Instagram.[12]


[1] Paige Leskin, Inside the Rise of TikTok, the Viral Video-Sharing App Wildly Popular with Teens and Loathed by the Trump Administration, Business Insider (Aug. 7, 2020, 2:20 PM), https://www.businessinsider.com/tiktok-app-online-website-video-sharing-2019-7 [https://perma.cc/9FEM-CU69].

[2] Blake Montgomery, California Class-Action Lawsuit Accuses TikTok of Illegally Harvesting Data and Sending It to China, The Daily Beast (Dec. 2, 2019, 5:20 PM), https://www.thedailybeast.com/california-class-action-lawsuit-accuses-tiktok-of-illegally-harvesting-data-and-sending-it-to-china [https://perma.cc/Q5KJ-6CX2].

[3] Katie Canales, The US Treasury is Investigating TikTok over National Security Concerns, Treasury Secretary Mnuchin says, Business Insider (July 29, 2020, 10:17 AM), https://www.businessinsider.com/us-treasury-investigating-tiktok-bytedance-2020-7 [https://perma.cc/VV9B-GWSN].

[4] Jeff John Roberts, ‘A strange power’: The Secretive Presidential Committee that Could Kneecap TikTok, Fortune (Aug. 7, 2020, 8:31 AM), https://fortune.com/2020/08/07/tiktok-ban-trump-committee-foreign-investment-us-cfius/ [https://perma.cc/4T6G-7T3F].

[5] Congressional Research Service, The Committee on Foreign Investment in the United States (CFIUS) Summary (2020) https://crsreports.congress.gov/product/pdf/RL/RL33388 [https://perma.cc/H7T2-YLTE].

[6] Shining Tan, TikTok on the Clock: A Summary of CFIUS’s Investigation into ByteDance, Center for Strategic & International Studies (May 13, 2020), https://www.csis.org/blogs/trustee-china-hand/tiktok-clock-summary-cfiuss-investigation-bytedance [https://perma.cc/XY7B-6RGX].

[7] Brian Fung, Does TikTok’s Deal with Oracle Avert a US ban?, CNN Business (Sept. 14, 2020, 12:06 PM), https://www.cnn.com/2020/09/14/tech/tiktok-deadlines/index.html [https://perma.cc/2R8H-YN5K].

[8] Id.

[9] Nathan Ingraham, TikTok Sues the US Government over Upcoming ban, Engadget (Aug. 24, 2020), https://www.engadget.com/tiktok-sues-us-government-152040736.html [https://perma.cc/2B8P-2MZV].

[10] Id.

[11] Brian Fung & Selina Wang, TikTok will Partner with Oracle in the United States after Microsoft Loses bid, CNN Business (Sept. 14, 2020, 4:29 PM), https://edition.cnn.com/2020/09/13/tech/microsoft-tiktok-bytedance/index.html [https://perma.cc/33GA-8D3M].

[12] Julia Alexander, Instagram Launches Reels, its Attempt to Keep you off TikTok, The Verge (Aug. 5, 2020, 9:00 AM), https://www.theverge.com/2020/8/5/21354117/instagram-reels-tiktok-vine-short-videos-stories-explore-music-effects-filters [https://perma.cc/F58Z-2686].


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