WASHINGTON • President Donald Trump’s unprecedented demand that the United States get a cut of the proceeds from the forced sale of Chinese Internet giant ByteDance’s TikTok short-video app is based on an interpretation of US law that regulatory lawyers say may be open to challenges.
White House officials on Tuesday also could not say how the US government would receive a portion of the proceeds from any sale of TikTok’s US operations, one day after Mr Trump called for a cut of the money.
The Committee on Foreign Investment in the United States (CFIUS), a US government panel that reviews deals for potential national security risks, has given ByteDance until Sept 15 to negotiate a sale of TikTok to Microsoft, amid concerns over the safety of personal data that the app handles under its Chinese parent.
Microsoft has said it is seeking to buy the assets of TikTok in North America, Australia and New Zealand. It has not disclosed how much it is willing to pay, though sources previously told Reuters that ByteDance executives value all of TikTok at more than US$50 billion (S$68.4 billion).
“A very substantial portion of that price is going to have to come into the Treasury of the United States because we’re making it possible for this deal to happen,” Mr Trump told reporters on Monday.
CFIUS legislation gives the US government broad authority to seek mitigation from companies that are jeopardising national security, legal experts said.
While CFIUS has never before sought a cut from the proceeds of a divestiture it has ordered, the White House could argue that imposing a fee on ByteDance would deprive it of resources that would otherwise support China’s government on technology initiatives that could harm US interests, some of the legal experts added.
“It’s certainly inconsistent with the intent of Congress… and with CFIUS’ longstanding concern to maintain a reputation for acting apolitically and solely on grounds of national security, but it’s not clear that it’s outside the President’s statutory authority,” said Mr Paul Marquardt, a regulatory lawyer at Cleary Gottlieb.
US law states that presidential decisions blocking deals on national security grounds are not subject to judicial reviews.
However, a legal challenge is possible under the fifth amendment of the US Constitution, which prohibits the government from seizing property without just compensation, as well as under other laws, legal experts said.
While a previous fifth amendment challenge to a CFIUS order had limited success, this would be the first time a challenge could be mounted against the US government imposing a deal fee, the experts added.
“This is akin to the Foreign Corrupt Practices Act but on US soil, where the US government would be able to require what is tantamount to a bribe in order to obtain a regulatory approval for a business transaction,” DLA Piper lawyer Nicholas Klein said.
It is not clear if Mr Trump will make good on his demand for a slice of the TikTok deal proceeds.
“There’s no specific blueprint here,” White House economic adviser Larry Kudlow said on Fox Business Network on Tuesday.
“It may be that the President was thinking, because the Treasury has had to do so much work on this, there are a lot of options here. I’m not sure it’s a specific concept that will be followed through… Regarding fees or anything like that, all that remains to be seen,” Mr Kudlow said.
White House spokesman Kayleigh McEnany, speaking to reporters at a separate briefing, also gave no other details and said she did not want to get ahead of Mr Trump on the issue. She reiterated that the US planned to take some action on Chinese-owned apps, including TikTok, in the coming days, but gave no details.
In its blog post, Microsoft pledged to add more security, privacy and digital safety protections to the TikTok app and ensure that all private data of Americans be transferred back to the US and deleted from servers outside the country.