LOS ANGELES _ TikTok on Monday sued the Trump administration, declaring that the president's executive order against the popular video app and its Chinese parent company is unconstitutional.
President Donald Trump signed an executive order earlier this month that would bar TikTok's parent company, China-based ByteDance, from doing business with American businesses starting on Sept. 20.
The vague order could cause companies such as Apple and Google to pull TikTok from mobile app stores, block brands from placing ads on TikTok and potentially stop ByteDance from paying its U.S. employees, legal experts said. That has caused uncertainty among TikTok's more than 1,500 U.S. employees and panic among some of its video creators.
TikTok said Trump's order "has the potential to strip the rights of that community without any evidence to justify such an extreme action and without any due process," the company said in a statement Monday. "We do not take suing the government lightly, however we feel we have no choice but to take action to protect our rights, and the rights of our community and employees."
The lawsuit, filed by TikTok and ByteDance in federal court in L.A., names as defendants Trump, the U.S. Department of Commerce and Secretary of Commerce Wilbur Ross.
U.S. Department of Justice spokeswoman Kerri Kupec declined to comment.
TikTok is under immense pressure as politicians in India, U.S. and Japan have raised concerns that ByteDance could be compelled to give user data to the Chinese government.
India has banned the app over such national security concerns, while Trump said he would support the sale of TikTok's U.S. operations to an American company like Microsoft, if some of the proceeds from the acquisition went to the U.S. Treasury Department. Microsoft has confirmed it is in discussions with ByteDance and that talks will conclude by Sept. 15. Other potential TikTok suitors include tech companies Twitter and Oracle.
The executive order, signed Aug. 6, threatens to end TikTok's thriving business in the U.S., where it has become a key player in the entertainment industry and is used by 100 million Americans. Music artists and labels leverage the app's creators to promote their songs, talent agencies use it to discover new talent and there are dozens of L.A. digital stars that make a living on TikTok through brand deals.
Globally, TikTok has exploded in popularity, with 689.1 million monthly active users in July of this year _ up from nearly 55 million in January 2018 _ the company said in its lawsuit.
"The order is very vague and ambiguous," said Bryan Sullivan, a partner at Early Sullivan Wright Gizer and McRae LLP. "It does not provide any detail whatsoever as to the scope of the order and how far it would be applied."
Trump issued the order under the International Emergency Economic Powers Act, which gives him the authority to regulate international commerce to address unusual or extraordinary threats, Sullivan said.
Trump said in his order that TikTok's "data collection threatens to allow the Chinese Communist Party access to Americans' personal and proprietary information _ potentially allowing China to track the locations of Federal employees and contractors, build dossiers of personal information for blackmail, and conduct corporate espionage."
TikTok said it has worked with the government's Committee on Foreign Investment in the United States for nearly a year and believes its app does not threaten national security.
The company said the U.S. government did not provide evidence that it was an actual threat and has maintained that it has not given and will not give information to the Chinese government.
"The order is thus a gross misappropriation of IEEPA (International Emergency Economic Powers Act) authority and a pretext for furthering the President's broader campaign of anti-China rhetoric in the run-up to the U.S. election," the company said in its lawsuit.
TikTok has said U.S. user data is stored in Virginia and backed up in Singapore and that it plans to open a transparency and accountability center in Culver City, near Los Angeles, where outside experts can see the code that powers the app's algorithm and learn about how it moderates content.
On another legal front, TikTok technical program manager Patrick Ryan said he plans to file a separate lawsuit against the Trump administration on behalf of the company's U.S. employees, who are concerned they will not be able to receive a paycheck due to Trump's order.
"It would have a significant impact because we have an employer that wants to pay us and we've done nothing wrong as employees and the order prohibits this," Ryan said.
Mike Godwin, Ryan's attorney, said his client has a strong case and the lawsuit will be filed shortly.
"It's very rare to see those powers used to essentially destroy a company and deprive employees of the right to be paid _ lawful employees have the right to be paid," Godwin said.
Trump also issued a second executive order on Aug. 14 against ByteDance, requiring the company to divest its TikTok U.S. operations by Nov. 12.
The best outcome for TikTok would be a finding that Trump's order is unconstitutional, but it could take months for the case to be resolved, Sullivan said. The clock would not stop on Trump's order unless a judge grants a temporary injunction, he added.
Meanwhile, rival companies like L.A.-based Triller, which operates a music video app, have gone on the offensive, poaching TikTok staff and some of its popular creators. For example, Raj Mishra, former head of strategy at ByteDance, has joined Triller as head of India operations.
The uncertainty is causing panic among some TikTok creators, who have urged fans to follow them on alternate video platforms including YouTube and Instagram. Several digital stars defected to Triller and joined as investors. Instagram earlier this month launched its own short-form video feature, Reels, which TikTok's CEO Kevin Mayer called a "copycat product."
To fend off rivals, TikTok announced the first 19 recipients of its $200 million U.S. creator fund. At least one creator received a six-figure deal over a year, according to a person familiar with the matter who declined to be named. The company plans to grow the fund to $1 billion in the next three years.
This investment has helped quell some of the anxiety among TikTok creators, many of whom rely on brand deals and promotions to support their livelihoods.
Marketers have been working with TikTok stars to reach young audiences who spend lots of time on the app. Some brands have clauses in their contracts that if a TikTok ban were to happen, the content would be posted on Instagram instead, said Amy Neben, a partner at Los Angeles-based Select Management Group.
"If you're not diversifying, you definitely have your head in the clouds," Neben said. "None of the creators own any of these products, so it's really on you to own your audience and to be able to pivot them."
But TikTok executives maintain that the company plans to be around for a long time and that it continues to have the support of creators and employees.
"Our employees have the benefit of hearing and seeing what we're working on, our commitment to our users," said Vanessa Pappas, TikTok U.S. general manager, at Vox virtual event "Pivot Schooled" earlier this month. "We're attracting amazing talent every day."
