Court Issues Injunction On First Part of TikTok Ban

The Trump Administration’s efforts to start banning TikTok is blocked by a federal court, its second defeat this month.

A federal court has granted a request made by TikTok to stop the first part of an order that would have required Apple and Google to remove the Chinese app from its stores or providing updates. The court was not persuaded by the President’s use of his emergency powers in ways that are contrary to the text of the law regarding information, information services, and personal communication. It is likely the Trump Administration appeals even though it appears TikTok has a very good chance of winning on the merits. However, this injunction does not effect, at present, the four other provisions in the order, and nor does it have any relevance on the order by the inter-agency group to ByteDance to unwind the deal that brought it musical.ly

The District Court of the District of Columbia granted TikTok’s request to stop the Department of Commerce from enforcing the first part of the order implementing the ban:

Any provision of services, occurring on or after 11:59 p.m. eastern standard time on September 27, 2020, to distribute or maintain the TikTok mobile application, constituent code, or application updates through an online mobile application store

The court found that TikTok’s claims on the misuse of “International Emergency Economic Powers Act” (IEEPA), 50 U.S.C. §§ 1701–08, the primary authority President Donald Trump relied on in his executive order banning the app, were unpersuasive. The court conceded “IEEPA contains a broad grant of authority to declare national emergencies and to prohibit certain transactions with foreign countries or foreign nationals that pose risks to the national security of the United States.” But, the court noted “IEEPA also contains two express limitations relevant here: the “authority granted to the President . . . does not include the authority to regulate or prohibit, directly or indirectly” either (a) the importation or exportation of “information or informational materials”; or (b) “personal communication[s], which do[] not involve a transfer of anything of value.” The court concluded:

In sum, the TikTok Order and the Secretary’s prohibitions will have the intended effect of stopping U.S. users from communicating (and thus sharing data) on TikTok. To be sure, the ultimate purpose of those prohibitions is to protect the national security by preventing China from accessing that data and skewing content on TikTok. And the government’s actions may not constitute direct regulations or prohibitions of activities carved out by 50 U.S.C. 1702(b). But Plaintiffs have demonstrated that they are likely to succeed on their claim that the prohibitions constitute indirect regulations of “personal communication[s]” or the exchange of “information or informational materials.”

After considering the risks of irreparable harm to TikTok and the equities and public interest, the court decided:

Weighing these interests together with Plaintiffs’ likelihood of succeeding on their IEEPA claim and the irreparable harm that Plaintiffs (and their U.S. users) will suffer absent an injunction, the Court concludes that a preliminary injunction is appropriate.

This is the second defeat of the Trump Administration’s efforts to ban companies from the People’s Republic of China (PRC) this month. On 19 September, a magistrate judge in San Francisco granted a preliminary injunction against the Trump Administration’s implementation of the WeChat order. As explained in a footnote, “[t]he plaintiffs are U.S. WeChat Users Alliance, a nonprofit formed to challenge the WeChat Executive Order, and individual and business users.” In short, they contended that the WeChat ban

(1) violates the First Amendment to the U.S. Constitution,

(2) violates the Fifth Amendment,

(3) violates the Religious Freedom Restoration Act, 42 U.S.C. § 2000bb(1)(a),

(4) was not a lawful exercise of the President’s and the Secretary’s authority under IEEPA— which allows the President to prohibit “transactions” in the interest of national security — because the IEEPA, 50 U.S.C. § 1702(b)(1), does not allow them to regulate personal communications, and

(5) violates the Administrative Procedures Act (“APA”) because the Secretary exceeded his authority under the IEEPA and should have promulgated the rule through the notice-and-comment rulemaking procedures in 5 U.S.C. § 553(b).

The judge granted the motion for a preliminary injunction “on the ground that the plaintiffs have shown serious questions going to the merits of the First Amendment claim, the balance of hardships tips in the plaintiffs’ favor, and the plaintiffs establish sufficiently the other elements for preliminary-injunctive relief.” The judge seemed most persuaded by this claim and summarized the plaintiffs’ argument:

• First, they contend, effectively banning WeChat — which serves as a virtual public square for the Chinese-speaking and Chinese-American community in the United States and is (as a practical matter) their only means of communication — forecloses meaningful access to communication in their community and thereby operates as a prior restraint on their right to free speech that does not survive strict scrutiny.
• Second, even if the prohibited transactions are content-neutral time-place-or-manner restrictions, they do not survive intermediate scrutiny because the complete ban is not narrowly tailored to address the government’s significant interest in national security.

The Trump Administration will almost certainly appeal these decisions, but it remains to be seen how quickly the case moves through the court system.

As noted, the Committee on Foreign Investment in the United States (CFIUS) recommended that the President order ByteDance to divest musical.ly, and Trump did so in an “Order Regarding the Acquisition of Musical.ly by ByteDance Ltd.” The deadline for selling off this part of the company is mid-November, but this timeline was effectively moved up by Trump’s public comments about the sale and the TikTok executive order set to take effect in mid-September. Oracle, Walmart, and ByteDance are awaiting review of the deal in both Washington and Beijing. At present, the terms proposed seem to indicate Oracle would become a “trusted technology partner,” a term not used before in such transactions, and Walmart would provide “ecommerce, fulfillment, payments and other omnichannel services” to TikTok operations in the U.S. It has been suggested but contested that a majority of these operations would be in the hands of U.S. entities, but ByteDance has disputed that claim. Moreover, it has been separately claimed Oracle and Walmart would get a collective 20% stake in U.S. operations. All of this is unclear and subject to change depending on CFIUS review. Moreover, the PRC will need to approve the deal per its recently implemented export control regulations that would seem to bar the transfer of technology like TikTok’s algorithm.

In terms of background, on 18 September, the Trump Administration issued orders barring TikTok and WeChat pursuant to executive orders issued an “Executive Order on Addressing the Threat Posed by TikTok” and an “Executive Order on Addressing the Threat Posed by WeChat” that bar any transactions with the companies that made, distribute, and operate TikTok and WeChat respectively. The U.S. Department of Commerce (Commerce) issued orders effectuating the executive orders.

In a press release, Commerce explained:

As of September 20, 2020, the following transactions are prohibited:

1. Any provision of service to distribute or maintain the WeChat or TikTok mobile applications, constituent code, or application updates through an online mobile application store in the U.S.;
2. Any provision of services through the WeChat mobile application for the purpose of transferring funds or processing payments within the U.S.

As of September 20, 2020, for WeChat and as of November 12, 2020, for TikTok, the following transactions are prohibited:

1. Any provision of internet hosting services enabling the functioning or optimization of the mobile application in the U.S.;
2. Any provision of content delivery network services enabling the functioning or optimization of the mobile application in the U.S.;
3. Any provision directly contracted or arranged internet transit or peering services enabling the function or optimization of the mobile application within the U.S.;
4. Any utilization of the mobile application’s constituent code, functions, or services in the functioning of software or services developed and/or accessible within the U.S.

Commerce added:

Any other prohibitive transaction relating to WeChat or TikTok may be identified at a future date. Should the U.S. Government determine that WeChat’s or TikTok’s illicit behavior is being replicated by another app somehow outside the scope of these executive orders, the President has the authority to consider whether additional orders may be appropriate to address such activities. The President has provided until November 12 for the national security concerns posed by TikTok to be resolved. If they are, the prohibitions in this order may be lifted.

Commerce has submitted notices to be published this week in the Federal Register identifying the transactions that will be illegal regarding TikTok and WeChat:

Pursuant to Executive Order 13942, the Secretary of Commerce is publishing the list of prohibited transactions by any person, or with respect to any property, subject to the jurisdiction of the United States, with ByteDance Ltd. (a.k.a. Zìjié Tiàodòng), Beijing, China, or its subsidiaries, including TikTok Inc., in which any such company has any interest, to address the national emergency with respect to the information and communications technology and services supply chain declared in Executive Order 13873, May 15, 2019 (Securing the Information and Communications Technology and Services Supply Chain), and particularly to address the threat identified in Executive Order 13942 posed by mobile application TikTok.

On 19 September, the U.S. Department of Commerce issued a statement pushing back the effective date of the order against TikTik from 20 September to 27 September because of “recent positive developments” regarding a possible deal between ByteDance, Oracle, and Walmart that would satisfy U.S. national security concerns about the app.

© Michael Kans, Michael Kans Blog and michaelkans.blog, 2019-2020. Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Michael Kans, Michael Kans Blog, and michaelkans.blog with appropriate and specific direction to the original content.

Photo by Solen Feyissa on Unsplash