Analysis: byte jitter is unlikely to keep tiktoks US business

 Analysis: byte jitter is unlikely to keep tiktoks US business

After formally suing the trump administration, tiktoks fate has been widely concerned.

On the evening of August 27, Wal Mart announced in a statement that it was cooperating with Microsoft to bid for tiktok and negotiate the acquisition of tiktoks businesses in the United States, Canada, Australia and New Zealand.

On the 27th, byte skipping confirmed that Kevin Mayer, CEO of tiktok, resigned from byte skipping. Kevin Mayer officially joined byte hopping on June 1, 2020 as coo and Global CEO of tiktok. As tiktok was confronted with an executive order from the US government, the industry believes that this may be the reason for his resignation. But Kevin Mayer says, I chose to leave, not with the company, the companys prospects, and the companys vision.

On August 25, tiktok formally filed a lawsuit against the trump government in the United States, claiming to repeal the administrative order issued by trump on August 6 and forbidding the Ministry of Commerce from implementing the administrative order. According to the original indictment, the lawsuit was jointly filed by tiktok and its parent company, byte hopping. The objects of the lawsuit include US President trump, US Secretary of Commerce Ross and the US Department of Commerce.

Foreign governments and companies have previously launched many challenges to the US governments invoking of the IEEPAs administrative orders, said one legal source. Many of these challenges have failed. However, the prosecution of the trump administration is a back-to-back battle for tiktok. Tiktok said on its website on August 25 that the company had no choice but to take legal action to protect the legitimate rights and interests of enterprises, users and employees.

A broker told the shell financial reporter of Beijing news that the forced byte skipping and stripping tiktok is an impact on the commercial civilization of free trade. In the future, Chinese enterprises will die and their teeth will be cold. Enterprises will even worry about their overseas investment assets, which will bring more uncertainty to Chinese enterprises going abroad.

The indictment puts forward the seven crimes of the US government

Four unconstitutional and three ultra vires in US administrative orders

Before tiktok sued the U.S. government, trump signed administrative orders twice to put pressure on tiktok and its parent company byte jitter.

On August 14, trump signed the executive order acquisition for byte jitter u300bTheres solid evidence that byte skipping is through the acquisition of music social apps, said Eventually, it will merge into a social media application, tiktok, which may take actions that are detrimental to the national security of the United States. . Therefore, byte skipping is required to split within 90 days. The scope of divestiture includes any tangible or intangible assets or properties that support byte hopping to operate tiktok in the United States as determined by the U.S. Foreign Investment Commission (CFIUS); and Any data obtained or derived from U.S. applications. Byte runout must confirm to CFIUS that it has destroyed all data and copies that need to be stripped after stripping.

On August 6, trump signed an executive order for the first time, announcing that it would prohibit any U.S. individual or company from trading with byte jump and its subsidiaries in 45 days. According to the administrative order, not only can the United States require apple and Google App Stores to remove byte skipping applications, but also American companies are unable to provide products and technologies for byte skipping.

On August 25, tiktok formally sued, saying in its indictment that the purpose of the prosecution was to avoid the direct ban of tiktok by the US government. The reason why US President trump signed the executive order was that tiktok posed an extraordinary threat to the United States, so it was banned by the international emergency economic power act (IEEPA). But tiktok believes that Trumps executive order is unconstitutional and beyond its authority.

The indictment analyzes four unconstitutional and three ultra vires

First, the process of the executive order is unconstitutional: it does not give byte skipping and tiktok notice on tiktok ban, and does not provide the opportunity to appeal, which violates the due process provisions of the Fifth Amendment of the US Constitution.

Second, the promulgation of the executive order constitutes ultra vires: IEEPA grants the president of the United States the power to restrict and control economic transactions in response to the national emergency of abnormal conditions and special threats in order to protect national security, foreign policy and economy. The administrative order uses vague statements such as potential, possible and reported, and there is no evidence of actual threat caused by byte skipping.

Third, the executive order extends the scope of attack to byte jitter, which constitutes ultra vires: the executive order requires individuals and entities not to conduct any transactions with byte skipping and its subsidiaries, but even the so-called threat only points to tiktok, which is only one of the many services of byte skipping.

Fourth, the administrative order restricts personal communication and information material transmission, which constitutes ultra vires: this directly violates the provisions of IEEPA, which clearly stipulates that administrative acts are prohibited from hindering personal information communication and exchange.

Fifthly, the IEEPA on which the executive order is based violates the principle of prohibition of authorization, which constitutes a violation of the Constitution: the authorization of IEEPA is too vague and does not specify the guiding or binding principle for the president to exercise his discretion, so it violates the principle of separation of powers in the United States Constitution.

Sixth, it is unconstitutional to require payment of remuneration to the U.S. Treasury for the sale of tiktoks U.S. assets: this violates the provisions of the fifth amendment to the constitution that limit the power of the government to deprive private property.

Seventh, the executive order forbids tiktok from operating in the United States, which is unconstitutional: the code of tiktok is the speech protected by the first amendment of the United States Constitution, while the complete closure of tiktoks operation in the United States is far beyond the necessary measures to protect the interests of the government and violates the provisions of the first amendment on freedom of speech.

Tiktok has also taken top security measures in the industry to ensure the privacy and data security of users. Tiktok has the same level of security measures as US e-commerce companies and financial institutions, according to the complaint. In data collection, data storage, data access, data transmission, source code security and other aspects, there are strict control processes.

On July 29, tiktok announced the establishment of a transparency center, which enables internal and external experts to observe tiktoks content audit and check algorithm source code in real time. This transparent behavior is unmatched by other major social platforms and puts tiktok ahead of the industry. According to the complaint.

Origin acquisition

CFIUS ignored tiktoks evidence

According to the complaint, byte hopping has been trying to actively communicate with the US government for nearly a year since October 2019. But according to CFIUS, the agency has repeatedly refused to contact byte jitter about its concerns.

Wu Fei, director of the public diplomacy and strategic communication research center of Zhejiang University, told shell finance reporter of Beijing news that CFIUS played a key role in the attack of U.S. President trump on byte skipping.

CFIUS is composed of several departments led by the U.S. Treasury Department. It has the right to review covered transactions, including transactions initiated by foreign person or trading with foreign person, which may cause foreign person to obtain control over U.S. business.

Byte jump was acquired in 2017 The target enterprise, headquartered in China, has limited US assets and is a Chinese company. When CFIUS considered investigating the acquisition in 2019, byte skipping had already given up The vast majority of very limited U.S. assets.

A person who is close to byte beating told the Beijing News shell financial reporter that In the acquisition of, byte skipping has not been audited by CFIUS. Whether to confirm (CFIUS) at that time is relatively vague, because Although there is part of the U.S. structure, it is headquartered in China and has very little income in the United States.

In March 2020, after five months of jurisdiction evaluation, CFIUS informed the byte skipping plan to conduct a formal investigation. Three months later, the investigation was launched on June 15.

After learning about the Cfius investigation intention at first, byte skipping began to provide a large number of documents and information for CFIUS problems, including detailed documents that can show that tiktok U.S. user data security is guaranteed. While actively providing evidence documents, tiktok is also actively proposing solutions to reduce national security concerns.

An insider close to byte beating told shell finance reporter of Beijing news that tiktok has made a lot of adjustments, including localization of all operations and audits; data and servers are set up in the United States and Singapore; the general manager of the United States is completely isolated from the domestic board of directors in terms of organizational structure, and there is no reporting relationship, but there is still no way to gain the trust of the other party.

Tiktok believes that CFIUS final findings completely ignore the solid evidence and positive solutions provided by tiktok. It is expressed as: byte jump acquisition There are national security risks in the transaction, and there are no mitigation measures to address these risks.

In fact, CFIUS has not been able to provide clear evidence to support the above conclusion. According to the indictment, it is based on outdated news and does not mention the actual mitigation measures. At the same time, CFIUS also terminated all formal communication with byte skipping before the end of the legal review period.

In his second recent internal letter, Zhang Yiming said: what the United States really wants to see is not to force byte skipping to sell tiktok, but to completely ban tiktok.

The US government has been accused of unconstitutional, but the challenge has little chance of winning

It is unlikely to keep tiktoks US business

The indictment shows that the trump administrations executive order against tiktok constitutes four unconstitutional violations. The process is unconstitutional and the prohibition of freedom of speech is unconstitutional.

However, many legal professionals believe that tiktoks chances of winning this lawsuit in the United States are not optimistic, and the possibility that byte skipping can eventually keep tiktoks U.S. business is also small.

A legal source interviewed told the Beijing News shell finance reporter that the byte skipping lawsuit was aimed at the administrative order of August 6. The reason why the executive order of August 14 was not included is because the Cfius is an inter departmental Committee at the federal level, which has the right to review all foreign investment in the United States and judge whether it damages the national security of the United States The results of the Exxon Florio amendment, which was amended by the defense production act of 1950, are not affected by judicial evaluation, so it is difficult to overturn the case through the court.

Even in response to the August 6 executive order, the odds of byte skipping are slim. The International Emergency Economic Powers Act (IEEPA) was quoted in several places in the administrative order on August 6. According to the legal circles, foreign governments and enterprises have launched many challenges to the administrative orders adopted by the US government by invoking IEEPA, but generally they can only get support in terms of procedural legality, so it is difficult to challenge the relationship between the administrative order and its legal basis.

Zhao Binghao, associate professor of the school of civil and commercial economic law of China University of political science and law, pointed out in his article that there have been many attempts to overturn the presidents administrative decisions made under the IEEPA through judicial review. Some of these cases start from challenging the appropriateness of Congresss authorization to the president, and some start from the violation of the constitutional rights of the parties by the presidents administrative decisions. However, most of these cases ended in failure, reflecting the principle of judicial respect followed by the federal court. The most recent one was Huaweis two lawsuits against the US government, both of which were dismissed.

Although trump seems to have widened the legal boundaries of his emergency powers, judges are unlikely to intervene, Steven Davidoff Solomon, a professor at the University of California, Berkeley, School of law, told the media on August 24

As of July 1, 2020, successive US presidents have declared a state of emergency 59 times by invoking IEEPA, of which 33 orders are still valid. These states of emergency usually last about 10 years, and the oldest national emergency caused by the Iranian hostage crisis is about to enter its 50th year.

Zhao Binghao also said in the above-mentioned article that in fact, the declaration of a state of emergency by citing IEEPA has become a powerful tool for successive US presidents to forcefully implement administrative decisions, among which trump is the best. On May 15, 2019, he once quoted IEEPA and signed executive order No. 13873, declaring the United States into a so-called state of emergency, authorizing the US government to prohibit any technology and services owned or controlled by foreign adversaries that may pose a risk to (the United States) national security. Subsequently, the U.S. Department of Commerce listed Huawei and its subsidiaries in the list of entities that may pose a threat to the security of the U.S. state or bring risks to foreign policy interests.

In addition, in the view of the legal circles interviewed, the core concept of transaction in the administrative order of August 6 has not been clearly defined, and it has yet to be explained by the US Department of Commerce after the prescribed time limit has expired. Therefore, tiktok can only apply for a preliminary injunction order in the court after the specific restrictive measures have been clarified and the impact has been assessed. In the meantime, given that the administrative order requiring byte skipping to divest tiktok is still in force and is unlikely to be changed by the court, byte skipping currently has the option to either close tiktoks US company or sell it to another US company.

The three choices are helpless

Most worried about triggering a chain reaction in the international market

In the face of the two administrative decrees issued by the United States, tiktok can choose from the following options: first, directly exit from the United States, but exit from the U.S. market, which means that byte hopping may deprive tiktok of 100 million users in the United States and give it to its competitors; second, it can sell to American companies, such as Microsoft, so that Microsoft can compete with Facebook on short video social networking in the United States, and restrain Facebook at the same time In the global competition with tiktok on short video social networking; some people have proposed an alternative scheme, that is, tiktok is distributed to registered users, each with one share, which is a way for all users to hold.

In Wu Feis view, the first scheme is passive and belongs to a pure competitor who has already lost profits. The third scheme is unique and unique, but has little operability. Only the second scheme is relatively the best choice in the case of no choice. On the one hand, it can enhance Microsofts competitiveness in the field of social media, without leaving Facebook alone. This is in line with the values of the United States in the field of business competition, on the other hand, it is also conducive to the future global layout of byte hop. However, whether it can be successfully sold to Microsoft is still unknown.

After the U.S. issued a ban on byte skipping, it has been reported that Microsoft, twitter, Oracle, Google and other companies intend to bid for tiktoks U.S. business. However, due to the wide range and highly uncertain content of the US presidential decree on byte skipping, it is impossible to ensure that a solution acceptable to all parties can be reached within the time limit set by the US government.

A domestic investor told the shell financial reporter of Beijing news that the asset quality of tiktoks North American business was very high. It was initially valued at about US $40 billion, but it was once pushed down because of policy uncertainty. However, there are still many tiktok investors in the United States who want to buy all of them, and even set up a special fund for it. But the plan that all the US investors buy may not be approved by the U.S. government. They will worry about byte skipping, find someone to hold on behalf of them and control the company behind their backs.

Once the ban deadline is reached, the US government will be able to force the closure or divestiture of tiktoks US operations. This causes the byte to jump and start preparing the shutdown plan. It is understood that byte skipping has made the worst plan to shut down tiktoks US business. Because the shutdown involves more than 1500 employees and thousands of partners of tiktok in the United States, the company is making great efforts to assess the damage to the legitimate rights and interests of employees, users and partners after the shutdown, and simultaneously make a protection plan.

When it comes to the impact of stripping tiktok on byte skipping, a resigned employee of byte skipping told shell finance reporter of Beijing news that at present, the impact on the companys revenue and profits is not significant, and the impact is in the future and valuation. Tiktok is not optimistic because the TikTok revenue and profit are not large, but the reason why investors are optimistic about byte beating is the commercial realization of the tremble and the TikToks imagination. While TikTok is North America, its S market is in its interior, and TikTok India is at least a grade a market. Whats more worrying is that the US behavior may trigger a chain reaction in Europe, Japan and other markets.

According to the official data of byte skipping, tiktok has experienced explosive growth in the United States and the world since its introduction. At present, tiktok has covered more than 200 countries, has more than 2 billion downloads worldwide, and has more than 91 million monthly active users in the United States. According to public data, tiktok ranked fourth in the world with 730 million downloads in the whole year in 2019, surpassing Facebooks instagram.

According to the regional download list in 2019, tiktok has a good download volume in North America, Europe, Southeast Asia, Japan and South Korea. The United States and Canada in North America ranked second and sixth in the local download list; France, Germany, Sweden, Britain, Turkey and Spain in Europe ranked tenth, fourth, fourth, fifth, fourth and seventh in the local download list; India, Singapore, Indonesia, Vietnam and Thailand in Southeast Asia ranked first in the local download list It ranked seventh, seventh, third and fourth, and ranked sixth on the local download list in Japan, which had sailed earlier.

In May 2020, tiktok and overseas TikTok had more than 95 million 700 thousand dollars in revenues from AppStore and GooglePlay worldwide. Among them, about 89% of the revenue comes from the Chinese market; the US market ranks second, accounting for 6.2% of the revenue; and Turkey ranks third, accounting for 1.2%.

According to data from sensortower, tiktok was the most downloaded non Game App in the world in June 2020. If tiktoks U.S. business is shut down, byte hopping will lose at least 200 billion yuan at the selling price of $20 billion to $50 billion according to previous market rumors.

Vanessa Pappas, the US general manager of tiktok, took over as CEO of tiktok. In an interview on August 20, she strongly opposed the Cfius conclusion. She said she did not see any evidence to support tiktoks threat to us national security and was disappointed by CFIUSs ruling.

Beijing News shell finance reporter baijinglei editor Xu Chao proofread Wei Zhuo

Source: Wang Fengzhi, editor in charge of Beijing News_ NT2541