TikTok lawsuit: Trump play could cost company billions of dollars
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One of President Trump's first actions upon retaking office was to postpone enforcement of a law that required TikTok to be banned in the U.S. if still controlled by China's ByteDance.
Driving the news: That decision, and several that sprang from it, are the crux of a lawsuit that theoretically could cost TikTok U.S. — now under new ownership — billions of dollars. And possibly lead to renegotiation of the sale itself.
Catch up quick: Trump's original executive order appeared contrary to both the letter and spirit of the TikTok ban law, in that the President only was allowed to offer an extension if there was a qualified divestiture deal on the table — which there wasn't.
- But it was politically expedient, allowing Trump to portray himself as the savior of a very popular social media app.
- He then would repeat the process several more times, before eventually blessing a deal whereby Oracle (led by Trump pal Larry Ellison), private equity firm Silver Lake and Abu Dhabi investment firm MGX would jointly control 45% of TikTok U.S.
- That transaction closed this past January, with existing ByteDance investors holding around one-third of TikTok U.S. and ByteDance retaining nearly 20% (which was the legal limit).
- TikTok U.S. licensed the app's algorithm from ByteDance, but is responsible for U.S. data protection and content moderation.
Zoom in: The new lawsuit argues that Trump's executive orders were illegal and that the algorithm arrangement violates the law's requirement that ByteDance not maintain an "operational relationship" with TikTok U.S.
- It's spearheaded by Brendan Ballou, a Justice Department antitrust prosecutor under former President Biden, who recently launched a new law firm focused on what he refers to as political corruption.
- But the actual plaintiffs are a pair of individual shareholders in Meta and Google parent Alphabet, respectively, who argue they suffered financial harm by TikTok not being banned. For the record, neither Meta nor Alphabet ever sued over Trump's TikTok actions.
- The defendants are Trump and Attorney General Pam Bondi, both in their official capacities.
What they're saying: Ballou tells Axios that the request will be for a declaratory judgment from the court, which could lead to up to $850 billion in penalties — calculated by the fines that TikTok could have been required to pay for operating past the initial divestiture deadline.
- "If that happens, I suspect a new deal comes out of it," Ballou says.
State of play: The White House is likely to file a motion to dismiss the suit, although it didn't respond to a request for comment from Axios.
The bottom line: Yes, this lawsuit reads like a longshot. And ignores that Alphabet, by continuing to host TikTok in the Google Play Store, also could have been subject to large civil penalties (thus indirectly harming one of the plaintiffs).
- But it's presenting a reasonable dispute over how TikTok U.S. came to be, which means this long-running saga may not actually be over.
