TikTok’s troubles just got worse: The FTC could sue them, too

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A TikTok sign hangs on their building in Culver City, California, on March 11, 2024. | Damian Dovarganes/AP

The Federal Trade Commission has been investigating TikTok over allegedly faulty privacy and data security practices, and could decide in the coming weeks to bring a lawsuit or settlement, according to three people with direct knowledge of the matter.

The commission is weighing allegations that TikTok, and its Beijing-based parent company ByteDance, deceived its users by denying that individuals in China had access to their data, and also violated a children’s privacy law, according to the people, who were granted anonymity to discuss a confidential matter.

The agency, in partnership with the Justice Department, could either file a lawsuit or settle with the company, though a settlement has yet to be reached, the people said.

TikTok has been under fire for years from national-security hawks in Washington, who worry that the popular app is giving Chinese authorities access to Americans’ personal data. A settlement would allow the embattled social media company to resolve a long pending legal matter, but it would only add fuel to critics who argue that TikTok’s ties to ByteDance are a critical threat to national security.

That perceived danger is the backbone of multiple — so far unsuccessful — attempts to either force a sale of TikTok’s U.S. operations or ban the app entirely. A recent bill to force ByteDance to sell the app within six months or face a ban on U.S. app stores sailed through the House earlier this month before stalling in the Senate.

The FTC case is unrelated to the forced-sale bill.

FTC spokesperson Douglas Farrar declined to comment, as did a DOJ spokesperson. A spokesperson for TikTok declined to comment.

What happens next depends on discussions between the two federal agencies. Prior to bringing a case, the FTC must first refer the matter to the DOJ’s civil division in order to obtain civil penalties, whether via lawsuit or settlement. The FTC and DOJ are in ongoing discussions over exactly what should be included, the people said.

While the FTC is nearing the end of its investigation into TikTok, after referring the case to the DOJ, the department has 45 days to decide whether to pursue the settlement or lawsuit on the FTC’s behalf or send it back for the agency to litigate. That process complicates the time frame for a publicly filed case.

No final decision has been made on whether to bring a case, or what claims to include, the people said. It is not clear whether any action against TikTok would also include parent company ByteDance.

TikTok has been under scrutiny at the FTC for its privacy and data security practices for at least the past two years, the people said. In 2019, a previous version of the app settled a case with the FTC alleging violations of a children’s privacy law.

The FTC is weighing whether to bring some combination of a new case against TikTok under the Children’s Online Privacy Protection Act, or COPPA, as well as claims that the company violated the earlier settlement. The FTC is also focusing heavily on allegations that the company misled its users by stating falsely that individuals in China do not have access to U.S. user data, according to the people with knowledge of the matter.

TikTok maintains that American user data is siloed in the U.S. Under a settlement reached during the Trump Administration with the Committee on Foreign Investment in the United States, TikTok stores Americans’ user data in Oracle cloud servers in the U.S.

With COPPA fines topping $50,000 per violation, financial penalties in a case under the law could reach tens of billions of dollars or more, though a settlement would almost certainly yield a far smaller number.

In addition to the previous FTC settlement against TikTok, the European Commission opened a probe in February into whether the company breached new online content rules, including its privacy settings. Also in February, several Canadian privacy regulators launched their own investigation, and a group of state attorneys general are probing TikTok as well. Last year the company settled a privacy-related class action lawsuit in Illinois for $92 million.

Further complicating the FTC’s timeline, two Republican FTC commissioners were recently confirmed by the Senate, with Utah Solicitor General Melissa Holyoak sworn in on Monday, and Virginia Solicitor General Andrew Ferguson expected to be sworn in in the coming days. The arrival of the new commissioners could delay things slightly while they get up to speed, the people said.

In July 2022 Sens. Mark Warner (D-Va.) and Marco Rubio (R-Fla.), the chair and vice chair of the Senate Select Intelligence Committee, urged FTC Chair Lina Khan in a letter to open up a deceptive practices probe of the company over claims that it has deceived its users into believing that individuals in China do not have access to their data.

Warner and Rubio cited reports, including a Buzzfeed News story about U.S. user data being accessed in China. “We write in response to public reports that individuals in the People’s Republic of China (PRC) have been accessing data on U.S. users, in contravention of several public representations, including sworn testimony in October 2021,” the pair wrote, referencing Senate testimony from TikTok’s public policy chief Michael Beckerman.

Last year, Warner’s RESTRICT Act took a broader swing at technologies from foreign adversaries, but faced backlash from Republicans who said it gave the administration too much power.

A previous effort to ban the app by former President Donald Trump’s TikTok failed when a federal judge said it exceeded his legal authority.

The outcry against TikTok has been overwhelmingly bipartisan, with President Joe Biden pledging to sign the current bill if it reaches his desk.