Commerce Department Prohibits Transactions with TikTok and WeChat
September 18, 2020
The Commerce Department today announced prohibitions on transactions with TikTok and WeChat that will significantly impact the use of TikTok and WeChat in the United States. The Commerce Department’s actions implement two Executive Orders that President Trump issued last month targeting the popular Chinese-owned mobile applications based on national security and data privacy concerns. As of September 20, 2020, the Commerce Department action bans downloads of TikTok and WeChat from US-based online app stores and current users of the apps in the United States from receiving updates. Importantly, the prohibitions apply only to business-to-business transactions, and not to individual TikTok and WeChat users in the United States. The prohibitions also do not apply to the use of TikTok or WeChat outside the United States, including by US companies or US citizens.
Background on President Trump’s Actions Against TikTok and WeChat
As described in our prior alert, President Trump Issues Executive Orders Prohibiting Transactions with TikTok and WeChat, on August 6, 2020, President Trump issued Executive Order 13942 (Addressing the Threat Posed by TikTok, and Taking Additional Steps To Address the National Emergency With Respect to the Information and Communications Technology and Services Supply Chain), and Executive Order 13943 (Addressing the Threat Posed by WeChat, and Taking Additional Steps To Address the National Emergency With Respect to the Information and Communications Technology and Services Supply Chain). The Executive Orders found that TikTok and WeChat capture “vast swaths of information” from their users, including network activity, location data, and browsing and search histories, which “threaten to allow the Chinese Communist Party access to Americans’ personal and proprietary information.”
Prohibited Transactions under the Commerce Department Rules
Today’s Commerce Department announcement identifies the specific transactions prohibited by Executive Orders 13942 and 13943.
Beginning September 20, 2020, the Commerce Department action prohibits the following transactions related to WeChat by persons subject to US jurisdiction with the owner of the WeChat app, Tencent:
- Distributing or updating the WeChat app through an online mobile app store from which users in the United States may download for use on mobile devices;
- Providing internet hosting services, content delivery services, or internet transit or peering services that enable the functioning or optimization of WeChat;
- Utilizing WeChat’s code, functions, or services in the functioning of software or services developed or accessible in the United States; and
- Providing services through WeChat for the purpose of transferring funds or processing payments to or from parties within the United States (individual users, however, can continue to transfer and receive funds).
TikTok
The prohibitions applicable to TikTok take effect in two stages. Beginning September 20, 2020, the Commerce Department action prohibits transactions by persons subject to US jurisdiction related to the distribution or update of the TikTok app through an online mobile app store from which users in the United States may download for use on mobile devices. 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. As described in our prior alert, Trump Administration Continues to Target TikTok and Huawei, November 12, 2020 is the deadline for TikTok’s parent company, ByteDance, 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.
Implications
The prohibitions apply directly only to business-to-business transactions, and not to individual TikTok and WeChat users in the United States. But, the rules effectively preclude new US-based users from downloading the apps and current users cannot download updates to the apps, which will impact the app’s continued performance. US companies and citizens operating outside the United States are not subject to the prohibitions and can continue using both apps without restriction.
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, 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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