Preliminary Injunctions Delay Implementation of Commerce Department Orders Targeting TikTok and WeChat

In the latest twist in the TikTok-WeChat saga, the Commerce Department has been enjoined from implementing orders prohibiting certain transactions with Chinese-owned mobile applications TikTok and WeChat. Complaints filed in federal court challenged both the TikTok and WeChat orders and moved for preliminary relief, which were granted in each case. As described in our prior alert, Commerce Department Prohibits Transactions with TikTok and WeChat, the prohibitions—announced by the Commerce Department on September 18, 2020—ban US-based online app stores from offering the apps for download and current users of the apps in the United States from receiving updates. The prohibitions further prohibit persons subject to US jurisdiction from providing internet hosting services, content delivery, and similar activities necessary for the apps to function in the United States. As a result of the injunctions, the affected prohibitions will not be implemented until the litigation is resolved.

TikTok Preliminary Injunction

On September 27, 2020, US District Judge Carl Nichols of the District of the District of Columbia issued a limited preliminary injunction sought by TikTok. TikTok argued that the Commerce Department’s ban violated its First and Fifth Amendment rights, exceeds the President’s authority under the International Emergency Economic Powers Act (“IEEPA”), and violates the Administrative Procedures Act (“APA”).

Judge Nichols’ order focuses on whether the ban exceeded the President’s authority under IEEPA. IEEPA grants the President broad authority to declare national emergencies and to prohibit certain transactions with foreign countries or foreign nationals that pose a risk to US national security. But the statute has exceptions, colloquially referred to as the Berman Amendment, for the direct or indirect regulation of “personal communication[s]” that do not involve “anything of value” and the import or export of “information or informational materials.” TikTok argued that the Commerce Department ban applied to “information or informational materials” because TikTok users share and receive content—such as videos, photos, art, and news—over the app. The government responded that the ban only applied to business-to-business transactions and did not take any actions against individual TikTok users. Judge Nichols found the effect of the ban would limit US users from accessing the app, an indirect regulation of information across borders. The court further found that the ban would fall within the “personal communications” exception by indirectly preventing communications on TikTok. Based on these considerations, Judge Nichols held that a preliminary injunction was warranted.

The preliminary injunction only applies to the first stage of the ban, which was applicable to downloads and updates of TikTok and was set to go into effect on September 27, 2020. As described in our prior alert, the Commerce Department’s prohibitions on TikTok has two stages. In the second stage, beginning November 12, 2020, persons subject to US jurisdiction will be prohibited from providing internet hosting services, content delivery services, or internet transit or peering services that enable the functioning or optimization of TikTok and utilizing TikTok’s code, functions, or services in the functioning of software or services developed or accessible in the United States. The TikTok order indicates the court will consider whether a preliminary injunction is appropriate for the remaining provisions in separate proceedings at a later time.

Importantly, the TikTok preliminary injunction does not impact enforcement of President Trump’s August 14, 2020 Executive Order, described in our prior alert, Trump Administration Continues to Target TikTok and Huawei, requiring TikTok’s parent company, ByteDance Ltd., to divest all of its rights and interests in any assets or property used to enable or support the operation of TikTok in the United States by November 12, 2020. President Trump reportedly gave his informal “blessing” of a deal between ByteDance, Oracle Corp. and Walmart Inc. that would result in a new US-based company to run TikTok’s US operations. But a deal remains up in the air as both Washington and Beijing exert pressure on the parties.

WeChat Preliminary Injunction

On September 19, 2020, US Magistrate Judge Laurel Beeler of the Northern District of California granted a nationwide preliminary injunction in favor of WeChat. The plaintiffs, WeChat users in the United States, argued the Commerce Department’s ban violated their First and Fifth Amendment rights, is an unlawful exercise of the President’s authority under the IEEPA, and violates the APA.

The court found that “the plaintiffs have shown serious questions going to the merits of [their] First Amendment claim,” and that “the balance of hardships tips in the plaintiffs’ favor.” Specifically, Judge Beeler observed that “in the US, Chinese-American and Chinese-speaking WeChat users rely on the WeChat platforms to communicate, socialize, and engage in business, charitable, religious, medical-related, and political activities with family, friends, and colleagues” and that because of its “cultural relevance and practical interface with China” WeChat is “irreplaceable” for its US users. Based on these considerations, the court determined that “the prohibited transactions burden substantially more speech than is necessary to serve the government’s significant interest in national security” and held that the plaintiffs established irreparable harm and the balance of equities favored plaintiffs.

Implications

While federal courts have temporarily enjoined the Commerce Department from enforcing its prohibitions against TikTok and WeChat, the ultimate outcome remains uncertain. In the meantime, the injunctions signal that the Trump Administration may face difficulties in limiting transactions with social media apps, even when based on national security concerns.

The rulings may also complicate or delay the Commerce Department’s issuance of rules implementing President Trump’s May 15, 2019 Executive Order on Securing the Information and Communications Technology and Services Supply Chain (“Supply Chain EO”); see our prior alerts here and here. The TikTok and WeChat Executive Orders relied upon the national emergency declared in the Supply Chain EO, and the issues subject to the current litigation go to the core of the Commerce Department’s ability to apply IEEPA authority, as delegated by the Supply Chain EO, to broadly restrict use of communications technology through the Supply Chain EO. Consequently, the Commerce Department may further delay implementing rules in order to cure any deficiencies identified in the course of the TikTok and WeChat litigation.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Greta Lichtenbaum, an O’Melveny partner licensed to practice law in the District of Columbia, Theodore W. Kassinger, an O’Melveny of counsel licensed to practice law in the District of Columbia and Georgia, David J. Ribner, an O’Melveny counsel licensed to practice law in the District of Columbia and New York, John Dermody, an O’Melveny counsel licensed to practice law in California and the District of Columbia, Mary Pat Dwyer, an O’Melveny counsel licensed to practice law in the District of Columbia and Pennsylvania, and Paras Shah, an O’Melveny associate licensed to practice law in New York, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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