By Katy Stech Ferek and John D. McKinnon
The Trump administration will begin banning downloads and use of
popular Chinese-owned apps TikTok and WeChat late Sunday, in a move
U.S. officials said was driven by national-security concerns but
which drew objections for impinging on free-speech rights.
The Commerce Department issued regulations Friday to bar U.S.
companies from providing downloads or updates for the TikTok and
WeChat apps after 11:59 p.m. Sunday. Companies will also be banned
from providing data-hosting services for WeChat at that time.
"Each collects vast swaths of data from users, including network
activity, location data, and browsing and search histories," the
Commerce Department said. "Each is an active participant in China's
civil-military fusion and is subject to mandatory cooperation with
the intelligence services" of the Chinese Communist Party.
The regulations implement executive orders signed by President
Trump last month to ban the apps, but with two key concessions.
Commerce said it would allow U.S. companies to continue
providing web-hosting services for TikTok through Nov. 12, granting
more time for talks with its Chinese owner, ByteDance Ltd., and
Oracle Corp. to create a new U.S.-based owner of the video-sharing
app. Such a deal would allow the app, a fixture on millions of
American teens' smartphones, to endure.
Mr. Trump told reporters Friday that he expected to make a
decision soon on that partnership.
"They're going to be showing me everything in a little while on
Tiktok," the president told reporters at the White House before
departing for a rally in Minnesota. "We're going to make a fairly
fast decision. I don't think we have to delay it too much," he
added, calling TikTok "a pretty incredible asset."
Commerce will also allow U.S. companies to continue using WeChat
outside the U.S. -- including in China, where the multipurpose app
owned by Tencent Holdings Ltd. is used for mobile payments,
messaging, marketing and business communications.
American brands including Walt Disney Co. and Walmart Inc. rely
on WeChat to reach and collect payments from customers in China.
Nine out of 10 companies surveyed by the American Chamber of
Commerce in Shanghai said the ban would hurt their Chinese
operations, should the ban extend to China.
Some free-speech advocates and scholars sounded alarms over the
constitutionality of the administration's orders.
"I think these actions violate the First Amendment," said Erwin
Chemerinsky, dean of the UC Berkeley law school. "This is about
cutting off a medium of speech. That is unprecedented, even in the
context of trade restrictions, and unconstitutional."
On Friday, a federal judge in California declined to grant a
request from a WeChat users group for a preliminary injunction
blocking implementation of the executive order, but she agreed to
review additional arguments before a hearing set for Saturday
afternoon.
In a separate lawsuit that TikTok filed last month against
Commerce to stop the implementation of the orders, the app's
lawyers also raised First Amendment grounds and suggested that the
order unfairly punishes TikTok for providing political content.
"The order specifically justifies targeting TikTok based in part
on the content of the videos hosted on TikTok, citing concerns
about videos on 'politically sensitive' topics and videos about the
'origins of the 2019 Novel Coronavirus,' " TikTok lawyers said in
the lawsuit.
Federal lawyers have defended their actions, saying in court
filings in the WeChat suit that the executive ban "does not target
protected expression," and that numerous alternative platforms are
available.
A person with knowledge of the Chinese government's thinking
said the situation could have been worse, noting that U.S.
companies can continue using WeChat in China, and TikTok has been
given time to resolve the ban through a U.S. sale or
partnership.
More broadly, this person said, the U.S. appears to be moving
toward requiring Chinese firms doing business in the U.S. to store
their data here -- much as China requires U.S. companies to store
data there, over American objections. "Washington basically is
doing something it has long criticized Beijing for," the person
said.
In its order detailed Friday, Commerce said it would block "any
provision of service to distribute or maintain the WeChat or TikTok
mobile applications, constituent code, or application updates
through an online mobile application store in the U.S." It will
also block any money transfers through the WeChat app for
U.S.-based users.
In a call with reporters Friday, a senior Commerce official
declined to explain how the new rules would be enforced or whether
it would impose monetary penalties for violations.
Commerce officials conceded that WeChat and TikTok users could
probably find workarounds to evade the ban. But they said the
effect of the rules will be to seriously degrade the functionality
of the apps for U.S. consumers.
Users will experience slow speeds to the point of timing out, so
while the service might still be technically usable, it won't be
very functional after Sunday night, officials said.
Nicol Turner Lee, director of the Center for Technology
Innovation at the Brookings Institution, a centrist Washington
think tank, said the Trump administration's actions were leading to
a decoupling of the U.S. and China, but one "without substantive
data or policy that would allow us to have reasonable alternatives
in the U.S. marketplace or strategy for ensuring U.S. companies do
not get closed out of emerging markets."
"The impulsiveness of this administration to restrict our
dealings with Chinese companies also doesn't factor in the economic
consequences," she said.
Commerce Secretary Wilbur Ross said that he made the decision on
the rules after Mr. Trump ordered his department to review the apps
for national-security concerns last month. "China has been taking
all kinds of data," Mr. Ross said on the Fox Business Network.
"That's what we're trying to squelch."
In a statement, Tencent said that it has "always incorporated
the highest standards of user privacy and data security" and had
submitted a comprehensive proposal to address U.S. security
concerns.
TikTok said it has "already committed to unprecedented levels of
additional transparency and accountability well beyond what other
apps are willing to do, including third-party audits, verification
of code security, and U.S. government oversight of U.S. data
security."
While U.S. companies would be allowed to continue using WeChat
outside of the country, the Commerce announcement indicated that
the agency could prohibit overseas use of WeChat by Americans in
the future. It also could move against other online services
offered by Tencent such as its gaming platforms, according to the
Commerce announcement.
Commerce officials delayed prohibition of transactions that
would greatly impair TikTok's user experience until Nov. 12,
matching the 90-day deadline that Mr. Trump set for the divestiture
of TikTok's U.S. operations. In that order, the president said that
ByteDance, "might take action that threatens to impair the national
security of the United States."
Asked whether he expects a deal before the election, Mr. Trump
said he hoped to reach an agreement quickly. "We're not going to do
anything to jeopardize security. At the same time, it's an amazing
company and very, very popular."
TikTok officials said the app surpassed two billion global
downloads last month and has roughly 50 million daily active users
in the U.S. The Trump administration contends that the data TikTok
collects from U.S. consumers could be shared with the Chinese
government. TikTok has said it would never hand over such data.
In response to a question, a Commerce official rejected the idea
that, in light of TikTok's popularity, politics played a role in
postponing the full ban until after the Nov. 3 election.
Beijing-based ByteDance has been locked in negotiations over how
to address the U.S. government's security concerns, and this week
seemed to be gaining momentum toward an agreement Mr. Trump could
sign. A consortium of U.S. companies, led by Oracle, are discussing
a plan to take a majority stake in a new company that would oversee
TikTok's operations and ensure its data security.
People involved with the talks have said throughout the week
that an agreement appeared imminent, even while important issues
were still being ironed out. But the announcement on Friday
indicates more distance between the two sides may exist than
previously understood.
A senior Commerce official said Friday that as the TikTok deal
moves forward, Mr. Ross is prepared to "change or even potentially
remove the restrictions [on TikTok] if the president agrees to a
deal."
WeChat and its Chinese sister app Weixin have about 1.21 billion
monthly active users combined. On an earnings call in August,
Tencent executives sought to distinguish the two apps and allay
investors' fears. The company generates less than 2% of revenue
from the U.S., a Tencent executive said at the time.
Launched by Tencent in 2011, WeChat has become the go-to example
of China's capacity to innovate. In addition to running the world's
most-used social media app, Tencent is the world's biggest
videogame company by revenue. In the U.S., Tencent owns Riot Games
Inc., creator of the popular videogame "League of Legends," and has
stakes in "World of Warcraft" maker Activision Blizzard Inc. and
Epic Games Inc., developer of the popular game "Fortnite."
After Mr. Trump's August executive orders, Tencent hired Edward
Royce, former chairman of the House Foreign Affairs Committee, and
four other lobbyists from Brownstein Hyatt Farber Schreck LLP,
according to a disclosure filing.
With a market value of over $645 billion, Hong Kong-listed
Tencent is one of the biggest companies in China and works closely
with the government. Chairman, and CEO Pony Ma has been a member of
the rubber-stamp National People's Congress since 2013.
Jing Yang, Georgia Wells and Lingling Wei contributed to this
article.
Write to Katy Stech Ferek at katherine.stech@wsj.com and John D.
McKinnon at john.mckinnon@wsj.com
(END) Dow Jones Newswires
September 18, 2020 18:47 ET (22:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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