DOJ Drops TikTok Claims by FTC Over Misleading Consumers (1)

The US Justice Department is dropping one of two proposed claims against ByteDance Ltd.’s TikTok, planning to focus a consumer protection lawsuit later this year on children’s privacy instead of allegations the video-sharing platform misled consumers about their data security.

The department is preparing to file the lawsuit on behalf of the US Federal Trade Commission, which investigated the case, according to people familiar with the matter, who asked not to be identified discussing interagency communications.

The FTC gave the Justice Department a referral with two parts. The department plans to drop one part of the complaint alleging that TikTok deceived US consumers by failing to inform them that Beijing-based employees of its parent company, ByteDance, would have access to their personal and financial information, the people said. The DOJ plans to proceed with allegations the company violated the Children’s Online Privacy Protection Act, which bars collecting data about children under the age of 13.

TikTok has faced enormous scrutiny over the security of user data and ties between its parent company, ByteDance, and the Chinese government. President Joe Biden in April signed a law that would ban TikTok unless it is sold within a year. The company is challenging the law in the courts.

The FTC declined to comment on the DOJ’s decision.

“The Justice Department cannot comment on the substance of the referral from the FTC against TikTok,” said DOJ spokesman Terrence Clark. “Consistent with our normal approach, the Department consulted with FTC in advance of this referral and will continue that consultation going forward.”

The Justice Department, which is litigating against TikTok in the D.C. Circuit, “is uniquely situated to evaluate the best ways to hold TikTok accountable for the violations of law alleged here while also ensuring that this case does not interfere with other proceedings raising critical national security issues,” Clark added.

When the FTC seeks monetary penalties — such as when a firm violates a settlement agreement — it must refer the matter to the Justice Department for litigation. The same goes for cases the FTC investigates under federal consumer protection laws related to children’s online privacy.

The FTC recommended the agency sue TikTok over the two violations and took the unusual step of making its referral public on June 18. The FTC and Justice Department have been at odds over recent consumer protection cases involving Amazon.com Inc. and Meta Platforms Inc.

For more: TikTok Argues US Disregarded National Security Plans Before Ban

TikTok in 2019 paid $5.7 million to settle similar FTC allegations that it had illegally collected personal information from children. As part of that, the company agreed to provide annual reports to the agency about its data collection and compliance with the settlement. Those reports helped lead to the current case.

The DOJ’s Consumer Protection Branch has 45 days from when the FTC makes a referral to decide whether it wishes to litigate or send the case back to the FTC. The Justice Department almost always opts to take charge of the case as it can retain as much as 3% of the civil penalties it collects.

Earlier this year, the FTC asked Congress to amend the law and allow it to litigate its own cases, saying the process for referring cases to the Justice Department is “badly broken.”

(Updates with Justice Department statement starting in the sixth paragraph.)

--With assistance from Emily Birnbaum.

To contact the reporters on this story:
Leah Nylen in Washington at lnylen2@bloomberg.net;
Chris Strohm in Washington at cstrohm1@bloomberg.net

To contact the editors responsible for this story:
Sara Forden at sforden@bloomberg.net

Elizabeth Wasserman

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